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Progress  in  Latin- America 


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PHILADELPHIA 

American  Academy  of  Political  and  Social  Science 

1911 


Copyright,  191 1,  by 

The  American   Academy  of   Political  and   Social   Science. 

All  rights  reserved. 


\/:C^ 


451  f> 


CONTENTS 


PAGE 

INDIVIDUAL  EFFORT  IN  TRADE  EXPANSION 1 

Hon.  Elihu  Root.  United  States  Senator  from  New  York. 

THE  FOURTH  INTERNATIONAL  CONFERENCE  OF  THE  AMER- 
ICAN  STATES    ' 7 

Hon.  Henry  White,  Chairman  of  the  American  Delegation  to 
the  Fourth  International  Conference  of  the  American  States. 

THE  FOITRTH  PAN-AMERICAN   CONFERENCE    IG 

Paul  S.  Reinsch,  Delegate  to  the  Fourth  Pan-American  Con- 
ference; Professor  of  Political  Science,  University  of  Wis- 
consin. 

THE    MONROE    DOCTRINE   AT    THE    FOURTH    PAN-AMERICAN 

CONFERENCE    24 

Hon.  Alejandro  Alvarez,  Of  the  Chilean  Ministry  of  Foreign 
Affairs,  Santiago,  Chile. 

BANKING  IN  MEXICO    31 

Hon.  Enrique  Martinez-Sobral,  Chief  of  the  Bureau  of  Credit 
and  Commerce  of  the  Mexican  Ministry  of  Finance. 

THE   WAY   TO   ATTAIN   AND   MAINTAIN   MONETARY   REFORM 

IN    LATIN-AMERICA    40 

Charles  A.  Conant,  Former  Commissioner  on  the  Coinage  of 
the  Philippine  Islands,  New  York. 

CURRENT  MISCONCEPTIONS  OF  TRADE  WITH  LATIN-AMERICA       50 
Hugh  MacNair  Kahler,  Editor  of  "How  to  Export";  Vice-Pres- 
ident,   Latin-American    Chamber    of    Commerce;     Publisher 
^  of  the  Spanish  periodicals,  "America"  and  "Ingenieria." 

INVESTMENT    OF    AMERICAN    CAPITAL    IN    LATIN-AMERICAN 

^  COUNTRIES     60 

1^  Wilfred     H.     Schoff,     Secretary,    Commercial     Museum,     Phil- 

adelphia. 

COMMERCE  WITH   SOUTH   AMERICA    70 

''^  PITBLIC    IXSTRUCTIOX    IN    PERU    8.5 

i  Albert  A.  Giesecke,  Ph.D.,  Rector  of  the  University  of  Cuzco, 

■?  Cuzco,  Peru. 


(iii) 


a37i45 


IV  Contents 

PAGE 

THE  MONETARY  SYSTEM  OF  CHILE 105 

Dr.  Guillermo  Subercaseaux,  Professor  of  Political  Economy, 
University  of  Chile. 

THE  SOCIAL  EVOLUTION  OP  THE  ARGENTINE  REPUBLIC 129 

Hon.  Ernesto  Quesada,  Attorney-General  of  the  Argentine  Re- 
public; Professor  in  the  Universities  of  Buenos  Ayres  and 
La  Plata. 

COMMERCIAL  RELATIONS   OF  CHILE    153 

Hon.  Henry  L.  Janes,  Division  of  Latin-American  Affairs,  De- 
partment of  State,  Washington. 

CLOSER   COMMERCIAL  RELATIONS   WITH   LATIN-AMERICA...      160 

Bernard   N.   Baker,  Baltimore,  Md. 
IMMIGRATION— A  CENTRAL  AMERICAN  PROBLEM    165 

Ernst  B.  Filsinger,  Consul  of  Costa  Rica  and  Ecuador,  St. 
Louis,  Mo. 


INDIVIDUAL  EFFORT  IN  TRADE  EXPANSION^ 


By  Hon.  Elihu  Root, 
United  States  Senator  from  New  York. 


Governments  may  hold  doors  open  all  over  the  world,  hut  if 
there  is  no  one  to  go  through  them  it  is  an  empty  form,  and  people 
get  tired  of  holding  doors  open  as  an  empty  form.  The  claims  of 
a  government  to  consideration  soon  come  to  he  regarded  as  preten- 
tious unless  there  arc  really  substantial  interests  behind  the  claims. 
No  government,  and  least  of  all  our  government,  least  of  all  a  demo- 
cratic republic,  can  make  commerce  to  go  through  open  doors,  to 
avail  itself  of  fair  and  equal  treatinent,  and  to  give  substance  and  re- 
ality to  the  theoretical  increase  of  amity  and  friendship  between 
nations.  The  people  of  the  country  must  do  it  themselves,  and 
they  must  do  it  by  individual  enterprise ;  they  must  do  it  by  turn- 
ing their  attention  toward  the  opportunities  that  are  afforded  by 
friendly  governments,  by  availing  themselves  of  those  opportuni- 
ties, and  by  carrying  on  their  business  through  availing  them- 
selves of  them.  I'.ut  while  it  is  a  matter  of  individual  enterprise, 
while  that  must  be  the  basis  of  all  development  and  progress, 
all  advance,  all  extension,  nevertheless,  there  must  be  some- 
thing besides  the  individual  enterprise.  The  great  principle  of  or- 
ganization which  is  revolutionizing  the  business  and  the  social  en- 
terprise of  the  world,  applies  here  as  it  applies  elsewhere.  No  single 
business  can  make  very  much  advance  except  as  all  other  busi- 
ness of  the  country  makes  advance.  No  one  can  go  into  a  new  field 
very  far  in  advance  of  others ;  and  the  way  for  each  man  to  make  his 
business  successful  in  a  new  field  is  to  do  his  share  as  a  member 
of  the  community,  as  a  citizen  of  his  country,  as  one  of  the  great 
business  organizations  of  his  country,  to  advance  the  trade,  the 
commerce,  the  influence  of  his  country  as  a  whole  in  the  field  into 
which  he  wishes  to  enter.  A  recognition  of  the  dependence  of 
each  man's  business  for  its  prosperity  and  progress  upon  the  pros- 
perity and  progress  of  the  business  of  all  is  necessary  in  order  that 

^Address    doliverorl    nt    tlie    ran-.\inoric:in    Comniorcial    Conforonco,    Washington, 
D.  C,  iMbniaiy,  17.   liMl. 

(579) 


2  The  Annals  of  the  American  Academy 

there  be  real  progress.  Now,  there  arc  governments  which  under- 
take actively  to  lead  in  this  direction,  and  they  are  governments 
which  are  making  enormous  progress.  Germany,  a  country  regarding 
which  J\Ir.  White  has  just  spoken  in  such  apt  and  appropriate  terms, 
leads,  and  to  a  considerable  extent  in  various  directions,  it  requires 
the  combination  of  her  manufacturers,  her  producers,  and  her  com- 
mercial concerns.  Japan  practically  does  also.  There  is  solidarity 
brought  about  by  the  wonderful  organization  of  that  combination; 
so  that  it  is  one  for  all,  and  all  for  one,  under  government  leadership. 
A\'e  can  not  do  it  here.  Our  country  can  not  take  that  kind  of  lead. 
Our  people  do  not  conceive  of  that  as  a  function  of  government,  and 
as  far  as  the  activities  of  our  government  are  concerned,  they  are 
largely  engaged  in  breaking  up  organizations  wdiich  do  increase  the 
industrial  efficiency  of  our  country.  I  do  not  want  to  be  understood 
as  criticizing  that.  It  is  all  right  to  break  them  up  wdien  they  are  tak- 
ing too  great  a  portion  of  the  field  for  themselves.  It  is  all  right  and 
important  to  break  them  up  when  they  are  monopolizing  the  means 
of  subsistence  that  should  be  spread  throughout  the  great  body  of 
the  people.  But  we  must  recognize  the  fact  that  when  our  govern- 
ment does  enforce  the  law — a  just  law,  wise  law — against  our  great 
commercial  and  our  great  industrial  organizations,  it  reduces  the 
industrial  efficiency  of  the  country.  There  is  only  one  way  to  coun- 
teract that  effect,  not  violating  any  law%  but  securing  through  or- 
ganization the  united  action,  and  concentrated  action  of  great  num- 
bers of  Americans  who  have  a  common  purpose,  substituting  that 
kind  of  organization  for  the  organizations  which  it  is  the  duty  of  our 
government  to  break  up,  because  they  are  contrary  to  our  laws. 

I  am  much  gratified  by  this  meeting  and  by  the  association  of 
so  many  practical  men,  business  men,  who,  by  uniting,  are  really 
creating  a  new  force  in  this  direction,  upon  which  I  am  sure  we 
ought  to  move. 

Let  me  say  one  thing  about  the  practical  direction  of  your 
efforts.  The  so-called  ship  subsidy  bill  has  been  reduced  now  to 
nothing  but  the  proposition  that  the  government  should  be  au- 
thorized to  pay  out  of  the  profits  of  the  ocean  mail  service 
adequate  compensation  to  procure  the  carriage  of  the  mails  by 
American  steamers  to  South  America;  that  is  what  it  has  come 
down  to.  It  passed  the  Senate,  as  Mr.  White  has  said,  only  by 
the  casting  of  the  vote  of  the  Vice-President,  and  I  do  not  know 

(580) 


Individual  Effort  in  Trade  Expansion  3 

what  will  be  done  with  it  in  the  House.  I  am  afraid  in  these  last 
days  that  it  may  be  lost  in  the  shuflle. 

There  arc  two  reasons  why  that  perfectly  simple  and  reason- 
able proposition  failed  to  carry  a  great  majority  of  the  Senate,  and 
fails — if  it  does  fail — to  be  certain  of  passing  the  House.  One  is 
because  there  is  a  difference  between  the  people  who  want  to  have 
the  thing  accomplished  about  the  way  in  which  it  should  be  accom- 
plished. That  is  one  of  the  most  common  things  in  the  w^orld.  A 
certain  set  of  men  who  want  to  have  a  revival  of  our  merchant 
marine  say  the  way  to  do  it  is  to  pay  subsidies,  the  way  to  do  it 
is  to  equalize  the  differences  between  the  cost  of  maintaining  and 
running  an  American  ship  and  the  cost  of  maintaining  and  running 
a  foreign  ship,  and  to  equalize  the  subsidies  paid  by  practically  all 
the  other  great  comm.ercial  nations  to  their  steamship  lines.  Another 
set  of  men  who  equally  desire  to  restore  our  merchant  marine  say 
that  is  not  the  right  way;  the  right  way  is  to  throw  open  the  doors 
and  enable  our  people  to  buy  their  ships  abroad ;  but  still  others 
say  the  true  way  is  to  authorize  our  ships  to  employ  crews  and  offi- 
cers of  the  low-priced  men  of  the  world,  relieve  them  from  the  obli- 
gations that  are  imposed  upon  them  in  respect  of  the  employment 
of  Americans,  people  of  the  United  States,  who  wdll  require  the 
high  standard  of  living  that  has  been  produced  in  the  United  States 
by  the  operation  of  our  protective  system,  relieve  them  from  the 
obligations  which  are  imposed  upon  them  by  our  laws  in  regard  to 
the  requirements  of  the  crew  and  air  space,  the  food,  and  the 
treatment  that  a  crew  is  to  receive,  so  that  it  will  be  cheaper  to 
run  an  American  ship.  Now,  between  these  different  sets  of  people, 
having  different  ideas  of  the  way  to  accomplish  a  thing,  nothing 
is  done ;  and  that  situation  which  exists  so  frequently  regarding  so 
many  measures  will  exist  forever  unless  there  is  put  behind  the 
proposition  a  force  that  gives  it  a  momentum  to  carry  it  over  such 
obstacles ;  put  force  enough  behind  it  so  that  the  gentlemen  in  the 
Senate  and  House  of  Representatives  understand  that  they  are  going 
to  be  held  responsible  by  the  American  people,  going  to  be  held  re- 
sponsible for  not  doing  the  thing,  for  not  finding  out  some  way  to 
do  it,  and  they  will  come  to  this  sensible  conclusion  very  shortly,  and 
that  is : 

"We  will  settle  the  controversy  about  the  way  it  should  be  done 

(581) 


4  The  Annals   of   tlie  American  Academy 

by  trying  one  thing  first,  and  if  that  don't  work  we  will  try  the 
other." 

Another  difficulty  about  this  measure  is  that  there  is  a  differ- 
ence in  appreciation  of  its  importance  in  different  parts  of  the 
country.  Down  here  on  the  seaboard  I  think  most  people  do  appreci- 
ate it.  You  appreciate  it ;  all  the  people  who  are  concerned,  or  wish 
to  be  concerned,  in  South  American  trade,  or  trade  of  the  Orient, 
appreciate  it ;  but  you  go  back  into  the  interior  of  the  country,  into 
the  great  agricultural  states  of  the  Northwest,  and  the  farther 
]\Iiddle  West,  states  along  in  the  valley  of  the  Mississippi  and  the 
Missouri,  and  the  people  there  are  thinking  about  other  things,  and 
they  have  a  natural  dislike  for  subsidies,  and  when  told  that  a 
measure  means  giving  somebody  else  something  for  nothing  they 
express  and  impress  upon  their  representatives  a  great  dislike  for  it. 
The  way  for  us  to  get  something  done  is  not  for  us  who  are  in 
favor  of  it  to  talk  to  each  other  about  it.  We  can  do  that  indefinitely 
without  getting  much  further.  The  way  is  to  take  steps  to  bring  to 
the  minds  of  the  people  of  the  valley  of  the  Missouri  and  the 
Northwest,  and  those  great  agricultural  states  the  importance  to 
them,  as  well  as  to  us,  of  having  our  merchant  marine  restored. 

I  noticed  here  the  other  day  that  the  people  of  San  Francisco 
were  justifying  their  confidence  in  themselves  by  procuring  all 
their  business  correspondents  in  the  State  of  New  York  to  write 
letters  to  me  in  favor  of  having  the  great  "Exposition  and  Cele- 
bration of  the  Opening  of  the  Canal  in  San  Francisco;" 
and  these  letters  came  in  by  the  thousand  from  my  constitu- 
ents. They  became  so  tiresome  that  I  came  very  near  voting  against 
the  project  as  a  measure  of  revenge,  but  it  showed  the  San  Fran- 
cisco people  understood  where  to  go  in  order  to  preach  their 
doctrine.  They  did  not  talk  to  each  other  on  the  Pacific  coast  about 
it.  They  came  to  New  York  and  got  their  business  correspondents 
interested  in  it  and  got  them  to  talk  to  their  representatives  about  it. 
That  is  what  you  want  to  do  in  Kansas  and  Nebraska  and  Iowa  and 
the  Dakotas — you  want,  through  all  the  relations  that  you  have, 
and  by  every  means  in  your  power,  to  represent  to  the  people  of 
those  great  interior  states,  who  have  but  little  direct  relation  with 
the  ocean  commerce  of  the  world,  the  real  conditions  under  which 
we  exist,  and  the  importance  to  the  whole  country  of  doing  some- 

(582) 


Individual  Effort  in  Trade  Expansion  5 

thing;  and  if  ihcy  do  come  to  appreciate  the  importance  to  the  coun- 
try of  doing  what  you  are  talking  about,  then  they  will  be  for  it, 
for  they  are  sincere,  patriotic  Americans. 

There  is  but  one  thing  more  I  want  to  say  regarding  the  rela- 
tions which  underlie  the  success  of  such  an  enterprise  as  you  are 
now  engaged  in.  Of  course,  you  have  had  a  great  amount  of  advice 
and  a  great  many  speakers  have  told  you  a  great  many  things  you 
know^  and  I  am  going  to  put  myself  in  line  with  the  distinguished 
gentlemen  who  have  preceded  me  by  doing  the  same  thing.  At  the 
basis  of  all  intercourse,  commercial  as  well  as  social,  necessarily  lies 
a  genuine  good  understanding.  That  can  not  be  simulated;  the 
pretense  of  it  is  in  general  in  the  long  run  futile.  People  trade  with 
those  with  w'hom  they  have  sympathy;  they  tend  to  trade  with 
their  friends.  The  basis  of  all  permanent  commercial  intercourse 
is  benefit  to  both  parties — not  that  cutthroat  relation  which  may 
exist  between  enemies,  where  one  is  trying  to  do  the  other — and 
a  relation  upon  mutual  respect,  good  understanding,  sympathy, 
and  friendship,  and  the  way  to  reach  the  condition  which  is 
thus  essential  is  by  personal  intercourse  and  acquaintance  between 
the  men  of  Anglo-Saxon  or  German  or  Norse,  or  whatever  race 
they  may  be,  peopling  the  United  States,  and  the  men  of  the  Latin- 
American  race  peopling  the  countries  of  the  South.  This  is  some- 
thing, my  friends,  in  which  our  people  are  very  deficient.  So  long 
we  have  been  separated  from  the  other  nations  of  the  earth  that 
one  of  our  faults  is  a  failure  to  appreciate  the  qualities  of  the 
people  who  are  unlike  us.  I  have  often  had  occasion  to  quote  some- 
thing that  Bret  Harte  said  about  the  people  of  a  frontier  western 
camp,  to  whom  came  a  stranger  who  was  regarded  by  them  as 
having  the  defective  moral  quality  of  being  a  "foreigner."  Differ- 
ence from  us  does  not  involve  inferiority  to  us.  It  may  involve  our 
inferiority  to  somebody  else.  The  sooner  our  business  men  open 
their  minds  to  the  idea  that  the  peoples  of  other  countries,  different 
races  and  speaking  different  languages  and  with  different  customs 
and  laws,  are  quite  our  equals,  w^orthy  of  our  respect,  worthy  of 
our  esteem,  regard,  and  affection,  the  sooner  we  shall  reach  a  basis 
on  w'hich  w^e  can  advance  our  commerce  all  over  the  world.  A  little 
more  modesty  is  a  good  thing  for  us  occasionally ;  a  little  appre- 
ciation of  the  good  qualities  of  others — and  let  me  tell  you  that 
nowhere   on   earth   are   there  more   noble,   admirable   and   lovable 

(583) 


6  The  Annals  of  the  American  Academy 

qualities  to  be  found  among  men  than  you  will  find  among  the 
people  of  Latin-America. 

Gentlemen,  I  hope  for  you  the  effectiveness  of  a  great  and  per- 
manent organization  and  that  you  may  advance  the  time  when 
through  more  perfect  knowledge,  through  broader  sympathies  and 
a  better  understanding,  ties  of  commerce  may  bind  together  all  our 
countries,  advance  our  wealth  and  prosperity  and  well-being  with 
equal  step  as  they  advance  the  wealth  and  prosperity  and  well-being 
of  all  those  with  whom  w^e  deal,  and  advance  the  tie  of  that  perfect 
understanding  of  other  peoples  which  is  the  condition  of  unbroken 
and  permanent  peace. 


(584) 


THE  FOURTH  INTERNATIONAL  CONFERENCE  OF  THE 
AMERICAN  STATES^ 


By  Hon.  Henry  White, 
Chairman  of  the  American  Delegation  to  the  Fourtli  International  Confer- 
ence of  the  American   States. 


The  promotion  of  friendship  and  closer  relations  with  Latin- 
America  is  not  a  new  subject  to  me.  On  the  contrary,  it  is  one,  the 
vast  importance  of  which  to  our  interests  and  to  those  of  the 
countries  in  question  I  have  long  realized,  and  its  importance  will 
be  immeasurably  increased  with  the  opening  of  the  Panama  Canal. 
For  years  past  I  have  availed  myself  of  every  opportunity  to  cul- 
tivate the  friendship  of  the  diplomatic  representatives  accredited 
from  the  other  American  republics  to  the  country  in  which  I  hap- 
pened for  the  time  being  to  represent  the  United  States,  and  to 
make  them  feel  that  they  shared  with  me  the  honor  of  representing 
America  as  a  whole.  The  result  of  this  was  not  only  the  creation 
of  a  strong  feeling  of  American  solidarity  among  us  all,  the  moral 
effect  of  which  was  beneficial  to  our  respective  interests  in  the 
particular  foreign  country  to  which  we  were  accredited,  but  it  also 
enabled  me  to  realize  how  earnestly  all  the  best  elements  in  the  dif- 
ferent countries  of  Latin-America  desire  closer  relations  with  the 
United  States  and  the  chief  obstacles  which  exist  to  the  complete 
realization  of  that  desire. 

It  is  deeply  to  be  regretted  that  those  vast  fields  for  lucrative 
investment  to  the  south  of  us — particularly  in  the  far  South — have 
unfortunately  attracted  little  or  no  attention  among  our  own  people, 
and  it  is  a  source  of  delight  and  satisfaction  to  me  which  I  can 
but  inadequately  express,  to  realize  that  at  last  we  have  begun  to 
turn  our  attention,  as  a  nation,  to  this  most  important  subject,  and 
that  representatives  of  distinguished  commercial  bodies  from  all 
sections  of  the  country  are  here  in  conference  assembled  to  discuss 
it  seriously. 

Well,  gentlemen,  greatly  as  the  importance  of  our  relations 
with  countries  to  the  south  of  us  had  previously  impressed  itself 

^Address   dclivcrod    at    the    ran-Amerioan    Commercial    Conference,    Washington, 
D.  C,  February  17,  1911. 

(585) 


8  TJic  Annals  of  the  American  Academy 

upon  nie,  that  impression  was  strcngtlicncd  a  hundred  fold  hy  my 
visit  last  summer  to  those  two  great  countries  of  tlic  far  South, 
Argentina  and  Chile. 

I  wish  I  could  give  this  assemhly  an  adequate  idea  of  the  com- 
plete harmony  that  i)rcvailcd,  and  feeling  of  American  solidarity, 
in  the  deliberations  of  that  great  Parliament  of  America,  the  Pan- 
American  Conference  at  Buenos  Ayres,  which  sat  for  over  seven 
weeks,  and  in  which  not  a  single  unkind  or  unfriendly  word  was 
uttered  from  beginning  to  end;  of  the  desire  manifested  by  all  other 
delegates  to  fall  .in  as  far  as  possible  with  the  views  of  their  col- 
leagues from  the  United  States;  and  of  the  warm  personal  friend- 
ship established,  which,  as  far  as  I  am  concerned,  will  be  lasting 
between  each  and  every  delegate  to  the  conference. 

You  will,  however,  shortly  have  in  your  hands  the  report  to 
the  Secretary  of  State  of  our  delegation  to  the  late  Buenos  Ayres 
conference,  and  I  would  suggest  that  every  member  of  this  confer- 
ence read  the  allusions  to  our  country  made  in  the  opening  and  clos- 
ing speeches  of  the  two  Argentine  Ministers  of  Foreign  Affairs, 
wdio  successively  held  office  during  the  sessions  of  the  conference, 
and  also  the  speeches  of  the  President  of  the  conference,  himself, 
on  the  days  of  its  opening  and  of  its  close.  I  may  add  that 
similar  sentiments  were  expressed  by  the  Chilean  President  and 
Minister  of  Foreign  Affairs,  during  the  ofiicial  visit  wdiich  our 
delegates  made,  as  a  special  embassy  to  the  hundredth  anniversary 
of  Chile's  independence,  in  speeches  which  they  made  on  our 
arrival  and  departure. 

But  perhaps  the  most  interesting  feature  of  the  conference — • 
and  the  most  important  to  us — next  to  the  harmony  and  friendship 
which  characterized  its  deliberations,  was  the  close  friendship  which 
sprang  up  there  between  the  three  ^reat  powers  of  the  far  South — 
Argentina,  Brazil  and  Chile — known  with  ourselves  as  the  "A,  B, 
C"  of  the  conference,  and  the  way  in  which  they  availed  them- 
selves of  every  opportunity  to  show  their  friendship  separately 
and  collectively  for  our  country.  Neither  of  the  three  ever  voted 
otherwise  than  as  our  delegation  did.  We  always  voted  first — by 
the  conference's  arrangement,  not  ours — and  the  other  three  voted 
in  the  order  mentioned,  immediately  after  us ;  and  on  the  whole, 
there  was  very  little  voting  against  those  four  delegations. 

Whatever  may  be   said  or  written   to  the   contrary  by  those 

(586) 


Fourth  International  Conference  of  American  States  9 

whose  interest  it  is  to  promote  discord  between  the  countries  of 
I.alin-Anierica  and  ourselves,  I  have  no  hesitation  in  asserting 
that  those  great  powers  of  the  South  have  no  longer  any  fear  of 
our  wishing  to  obtain  territorial  extension  at  their  expense  or  at 
the  expense  of  any  other  country,  or  of  our  aspiring  to  any  other 
undue  advantage  over  them ;  and  they  sympathize  fully  with  the 
efforts  our  government  is  making  to  improve  conditions  in  Central 
y\merica.  It  is  to  my  mind  of  the  greatest  advantage  to  all  America, 
and  to  this  country  particularly,  that  there  should  be  at  the  southern 
end  of  our  hemisphere  three  important  powers  in  complete  sympathy 
with  each  other  and  with  ourselves,  and  anxious  to  develop  trade  re- 
lations to  the  greatest  possible  extent  with  us. 

Those  great  countries  are  above  all  things  desirous  that  our 
merchants  should  come  there  and  do  business  with  theirs,  and 
they  cannot  understand  why  we  should  so  long  have  neglected  the 
opportunities  they  offer  us,  and  should  have  left  them  entirely  in 
the  hands  of  other  great  commercial  countries.  Not  only  Great 
Britain,  which  has  been  investing  for  more  than  a  century  in  the 
Argentine  Republic  and  other  American  countries,  has,  I  was 
credibly  informed,  2,500,000,000  of  dollars  invested  in  the  former 
alone,  producing  an  average  annual  return  of  at  least  10%,  but  Ger- 
many, Italy,  France  and  other  countries — the  first  particularly, 
arc  doing  likewise.  A  first-class  passenger  and  freight  steamer 
arrives  nearly  every  day  at  Rio  de  Janeiro  and  Buenos  Ayres  from 
one  European  port  or  another.  There  are  a  number  of  British, 
German,  Italian  and  other  foreign  banks,  in  those  and  other  Latin- 
American  cities,  and,  what  is  perhaps  most  important  of  all,  the 
citizens  of  the  countries  named  go  to  Latin-America  themselves — 
or  send  fellow  citizens  in  whom  they  have  confidence,  knowing  the 
language  of  those  countries — and  attend  in  ]icrson  or  through  such 
fellow  citizens  to  their  own  business.  And  in  this  connection,  I 
venture  to  appeal  to  those  present  here  to-day  to  urge  every  youth 
and  young  man  u])on  whom  they  have  any  influence  to  learn  the 
Spanish,  and  if  possible,  one  or  two  other  languages,  particularly 
French  and  German. 

But  how  is  it  with  us — the  nation  of  all  others  whose  influence 
should  be  felt  in  those  countries?  Not  a  single  American  bank  in 
Buenos  Ayres  or  Santiago ;  the  official  representatives  of  our  coun- 
try having  to  cash  their  drafts  on  the  Treasurer  of  the  United 

(587) 


10  The  Annals  of  the  American  Academy 

States  through  a  British  or  other  bank,  via  some  European  city. 
One  direct  passenger  steamer  a  month  from  New  York  to  Buenos 
Ayres  and  intermediate  ports  on  the  east  coast  of  South  America, 
taking  about  twenty-five  days  for  the  voyage,  and  another  requir- 
ing a  change  of  steamers  at  Rio,  in  about  the  same  time ;  and  those 
two  ships  under  the  flag  of  another  country ! 

In  addition  to  this,  scarcely  an  American  is  to  be  found  per- 
manently representing  American  business  interests  in  Buenos  Ayres, 
even  the  sale  of  the  machines  of  one  of  the  greatest  of  our  agri- 
cultural machine  manufacturers  being  in  the  hands  of  an  agent 
not  of  our  own  nationality,  who  also  sells  similar  machines  from  his 
own  country.  Can  that  man  be  blamed  if  he  gives  the  preference 
to  the  machines  of  the  country  from  which  he  hails,  and  only  sells 
ours  when  they  are  asked  for?  Of  course  not.  And  I  could,  if 
time  allowed,  give  many  similar  instances  of  the  way  in  which  we 
have  been  positively  inviting  other  great  countries  to  take  the  lion's 
share  of  these  wonderful  opportunities  for  investment ;  an  invitation 
of  which  they  have  certainly  not  been  slow  to  avail  themselves. 

The  whole  situation  is  simply  incredible  to  anyone  who  has  not 
actually  been  there  and  seen  it  for  himself.  I  have  however  de- 
rived much  consolation  during  the  past  few  days  from  the  knowl- 
edge that  the  head  of  one  of  our  large  business  firms  has  been  re- 
cently himself  to  the  Argentine  and  Chile,  and  has  secured  a 
ten-year  contract,  the  largest  ever  made,  I  am  told,  for  the  supply 
of  his  particular  commodity  in  any  foreign  country,  and  I  hope, 
when  the  particulars  of  this  transaction  become  known,  I  am  not 
at  present  allowed  to  mention  names,  and  especially  when  the 
voluminous  returns  which  are  certain  to  result  from  this  investment, 
begin  to  be  realized,  that  other  fellow^  citizens  of  ours  will  follow 
this  admirable  example  in  constantly  increasing  numbers. 

Gentlemen,  I  am  not  a  statistician,  and  if  I  were  I  should  not 
permit  myself  to  take  up  your  time  to-day  with  a  series  of  figures 
to  show  how  much  we  are  losing  annually  by  the  policy  we  have 
hitherto  pursued  in  respect  to  commercial  intercourse  with  South 
America. 

I  would  merely  say  that  in  my  opinion  there  is  but  one  w^ay — 
and  one  way  only — by  which  that  intercourse  can  be  placed  on  a 
proper  footing,  and  that  is  by  ships  of  our  own,  such  as  the  other 
great   commercial    countries    of    the    world,    w'ho   now   practically 

(588) 


Fourth  Iittcniatioiial  Conference  of  .Inierican  States         ii 

monopolize  the  trade  with  South  America,  have.  By  ships  I  mean 
first-class,  fast  passenger  and  freight  carrying  steamers,  flying  our 
own  flag,  between  our  ports  and  those  of  Central  and  South 
America. 

Nothing  can  be  more  derogatory  to  our  dignity  and  to  our 
interests  in  those  countries  than  the  fact  that  our  flag  is  never  seen 
there  on  merchant  steamers.  This  statement  some  persons  may 
consider  sentimental.  I  can  assure  you  that  it  is  not,  but  eminently 
practical,  there  being  no  question  as  to  the  fact  that  we  pay  an  enor- 
mous sum  to  other  nations — I  understand  upwards  of  $300,000,000 
annually — for  the  privilege  of  carrying  our  over-sea  commerce.  In 
comparison,  any  subsidy  that  could  be  imagined  would  be  the 
merest  trifle,  quite  apart  from  the  fact  that  under  present  con- 
ditions we  are  contributing  largely  toward  the  increase  and  main- 
tenance of  the  merchant  marine  of  other  countries,  which  must 
at  least  be  useless  to  us,  and  might  be  hostile,  in  the  event  of 
war.  For  this  reason,  I  cannot  help  deeply  regretting  the  fate 
which  seems  likely  to  befall  in  Congress  the  bill  popularly  known 
as  the  Gallinger  Ship  Subsidy  Bill,  providing  moderate  subsidies 
for  steamers  of  not  less  than  sixteen  knots,  running  between  our 
ports  and  those  of  Central  and  South  America.  It  was  only  passed 
in  the  Senate  by  the  Vice  President's  casting  vote,  and  wdll,  I  am 
told,  be  defeated  in  the  House  of  Representatives. 

I  am  wdiolly  unconnected  with  any  business  interests,  and 
consequently,  with  any  shipping  interests,  having  devoted  the  past 
twenty-eight  years  of  my  life  solely  to  the  diplomatic  service  of  the 
United  States.  I  am  neither  for  nor  against  subsidies,  and  am  in- 
clined on  general  principles  to  be  against  them  rather  than  in  their 
favor.  But  I  am  for  ships,  merchant  ships  under  the  American  flag, 
between  ports  of  this  country  and  the  rest  of  America,  and  if  we 
cannot  get  these  ships  otherwise  than  by  subsidies,  then  I  am  for 
subsidies,  or  for  any  other  measures  that  will  give  us  means  of  com- 
nnmication  with  our  sister  republics. 

The  size  and  speed  of  the  steamers,  which  the  European  com- 
mercial powers  are  sending  to  South  America,  are  being  steadily 
increased ;  and  the  Italians  have  now  two  or  three  new  ones  averag- 
ing eighteen  knots  an  hour.  With  such  ships,  the  voyage  from  New 
York  or  other  ports  of  the  United  States  to  Buenos  Ayres  could  be 
performed  in  less  than  fourteen  days,  and  to  Brazil  in  about  eleven 

(589) 


12  The  Annals  of  the  American  Academy 

days.  In  order  to  get  the  American  delegation  to  the  Pan-Amer- 
ican Conference,  under  our  own  flag,  the  government  had  to  send 
us  out  in  an  army  transport  which,  averaging  only  eleven  knots, 
took  twenty-one  days  for  the  voyage. 

Nations  are  like  individuals ;  they  cannot  become  intimate  with 
each  other  unless  their  respective  citizens  meet  from  time  to  time, 
and  exchange  views  in  personal  intercourse.  Still  less  are  they 
likely  to  trade  freely  and  to  have  confidence  in  each  other  save 
under  those  circumstances.  On  the  other  hand,  they  are  not  unlikely 
to  drift  apart  and  become  suspicious  of  each  other,  if  they  never 
do  meet,  and  the  only  way  in  which  the  people  of  the  countries 
south  of  us  are  likely  to  come  to  us,  or  ours  to  go  freely  to  them, 
is  on  good,  fast  steamships.  At  present  the  only  comfortable  way 
of  making  the  voyage  is  via  Europe. 

Nothing  can  be  more  interesting  and  remarkable  than  the  man- 
ner in  which  the  Germans  during  the  brief  period  of  their  existence 
as  a  great  nation,  and  particularly  of  late  years,  have  realized  that 
it  is  by  merchant  ships  of  their  own,  carrying  their  goods  all  over 
the  world  in  exchange  for  other  goods  wdiich  they  bring  home, 
rather  than  by  colonies,  that  their  influence  can  be  most  advan- 
tageously and  profitably  exercised  throughout  the  world.  They  are 
consequently  competing  most  successfully  by  means  of  their  fine 
merchant  steamers,  which  they  do  not  hesitate  to  subsidize  when- 
ever desirable,  for  the  trade  of  South  America,  with  all  the  other 
powers  now  engaged  therein.  And  I  say  this  in  no  spirit  of  hostil- 
ity, but,  on  the  contrary,  with  the  greatest  admiration  for  the  man- 
ner in  which  that  great  nation  has  realized,  from  the  first,  the  best 
way  of  extending  its  influence  and  of  increasing  its  wealth,  and 
has  allowed  no  question  of  expense  or  any  other  obstacle  to  stand 
in  the  way  of  the  attainment  of  those  objects  which  are  not  only 
legitimate  but  of  vital  importance  for  every  nation.  Even  the 
Japanese,  who  are  not  supposed  to  be  a  w^ealthy  nation,  but  are  a 
very  marvelous  and  intelligent  nation,  have  realized  also  the  im- 
portance of  the  South  and  Central  American  trade,  and  are  begin- 
ning to  compete  for  that  of  the  West  coast  with  a  line  of  subsidized 
merchant  steamers,  and  very  good  steamers  they  are,  too,  running 
to  Salina  Cruz  in  Mexico,  thence  to  Callao  and  from  there  to 
Valparaiso ;  returning  to  Japan  by  the  same  route. 

I  cannot  believe  that  we  are  the  only  nation  unable  to  have 

(590) 


Fourth  Iiitcrnatiuiial  Conference  of  American  States         13 

ships  wherewith  to  compete  for  our  share  of  that  great  commerce 
which  is  particularly  ^\■ithin  our  own  sphere,  and  should  he  ours, 
any  more  than  I  can  helieve  that  we  are  the  only  great  nation  of 
the  world  which  cannot  have  a  sound  monetary  system — -a  system 
whereby  our  periodical  financial  panics,  which  are  the  laughing 
stock  of  the  world  and  bring  ruin  to  thousands  of  our  citizens,  would 
be  avoided,  and  whereby,  if  we  had  such  a  system,  as  I  believe  we 
shall  have  before  long,  this  country  would  become  the  financial 
center  of  the  world. 

I  would  therefore  urge  the  great  commercial  bodies  of  the 
country,  whose  representatives  are  here  to-day,  and  those  who  are 
not  represented  also,  to  bring  all  possible  pressure  to  bear  upon 
members  of  Congress  from  their  respective  districts,  with  a  view 
to  turning  their  attention  to  the  restoration  of  our  merchant  marine 
— at  least  to  the  seas  between  our  ports  and  those  of  Central  and 
South  America ;  whether  by  subsidies  or  otherwise,  I  care  not, 
so  long  as  we  have  the  ships !  But  ships  we  must  have,  or  resign 
ourselves  to  becoming  a  tributary  nation  in  so  far  as  our  ocean- 
borne  trade  is  concerned,  to  those  who  carry  it  for  us.  I  suppose 
that  no  one  here  doubts  that  foreigners  carry  our  products  on 
terms  most  advantageous  to  themselves  and  not  to  us,  and  in  their 
own  way. 

If,  however.  Congress  has  not  seen  its  way  to  the  restoration  of 
our  merchant  marine  in  American  waters,  I  am  happy  to  say  that 
that  distinguished  body  took  a  step  last  week  of  far-reaching  im- 
portance to  our  commercial  interests,  for  which  it  deserves  all 
possible  credit.  I  refer  to  the  bill  which  was  passed  by  both  the 
Senate  and  House  of  Representatives  for  the  purchase  of  houses 
for  our  embassies,  legations  and  consulates  in  foreign  countries. 

I  have  trespassed  too  long  upon  the  time  of  this  assembly  to 
venture  upon  a  dissertation  upon  the  importance,  to  the  further- 
ance of  our  commerce  particularly,  of  that  measure;  but  I  am 
happy,  from  the  point  of  view  of  our  relations,  commercial  and 
otherwise,  with  our  sister  republics  of  America,  to  find  that  the 
provisions  of  this  Act  of  Congress  are  such  as  practically  to  compel 
our  government  to  limit  its  scope  at  present  to  those  particular  coun- 
tries, in  which  it  is  of  greater  importance  even  than  elsewhere, 
that  we  own,  without  a  moment's  further  delay,  our  official  buildings. 

I  understand,  but  have  not  yet  seen  the  Act  since  its  passage, 

(591) 


14  The  Annals  of  the  American  Academy 

that  no  more  than  $150,000  can  be  spent  under  its  provisions  upon 
any  one  building.  It  will  be  perfectly  possible  to  obtain  commodious 
and  suitable  buildings  within  that  limit,  in  every  South  and  Central 
American  capital,  except  Buenos  Ayres,  where  it  will  not  be  pos- 
sible to  do  so,  owing  to  the  enormous  rise  during  the  last  year  or 
two  in  the  price  of  land  in  the  best  sections  of  that  city,  and  to 
the  great  expense  there  of  building  and  of  everything  else. 

And  here,  I  should  just  like  to  say  a  word  about  the  stress 
which  has  been  laid  during  discussions  on  this  subject  in  Congress, 
in  the  press,  and  elsewhere  for  many  years  past,  upon  the  alleged 
impossibility  for  an  ambassador  or  minister,  with  little  or  no  pri- 
vate means,  of  living  in  a  house  costing  $150,000,  $200,000  or 
$300,000,  or  whatever  the  amount  may  be.  It  never  seems  to  have 
occurred  to  those  raising  that  question  that  the  cost  of  a  house 
depends  entirely  upon  the  place  in  which  it  is  situated.  In  the 
best  residential  districts  of  New  York,  a  house  costing  $150,000 
would  be  a  small  one,  so  would  such  a  house  be  in  similar  districts 
of  Buenos  Ayres,  London,  Paris,  Berlin,  Vienna,  Rome  or  St. 
Petersburg,  where  houses  of  moderate  size  cost  upwards  of  $300,000, 
and  even  $400,000,  according  to  the  price  of  the  land  on  which  they 
are  built,  and  to  other  local  conditions.  The  main  point  is  to  have 
a  house  of  suitable  size  for  our  foreign  representative  to  inhabit 
so  that  he  shall  not  be  dependent  upon  the  rapacity  of  local  land- 
lords, or  have  to  spend  the  whole  of  his  salary  upon  his  house  rent, 
as  is  the  case  with  our  present  minister  to  the  Argentine,  Mr.  Sher- 
rill,  who  has  rendered  invaluable  service  to  our  commercial  and 
other  interests  in  that  country.  He  not  only  has  had  to  do  this,  but 
has  been  turned  out  of  the  house  in  the  middle  of  his  term  of  office 
because  the  landlord  wanted  it  for  himself,  and  the  same  thing  has 
frequently  happened  to  our  ambassadors  in  the  great  capitals  of 
Europe. 

Our  present  ambassador  to  Italy  has  so  far  been  unable  to  find 
any  residence  at  all,  owing  to  the  overcrowded  condition  of  Rome, 
and  is  living  in  a  hotel,  which  is  eminently  derogatory  to  the  dignity 
of  the  country  he  represents,  and  constitutes  a  situation  against 
which  other  great  countries  protect  themselves  by  owning  their  em- 
bassy houses. 

This  is  a  subject  upon  which  I  have  felt  most  deeply  ever  since 
my  early  youth,  when  my  national  pride  was  humiliated  upon  going 

(592) 


Fourth  Iiilcnialioiial  Conference  of  American  States         15 

to  Paris,  just  after  the  Civil  War,  and  seeing  the  dignified  manner 
in  which  the  other  great  Powers  house  their  embassies  and  legations, 
while  all  that  we  could  call  a  legation  in  those  days  consisted  of  a 
few  rooms  up  three  flights  of  stairs,  over  a  corner  grocery  store! 
I  still  hardly  dare  trust  myself  to  speak  of  it.  But  fortunately 
it  is  unnecessary  any  longer  to  do  so,  as  Congress  has  at  last  taken 
steps  to  remedy  the  humiliation. 

Suffice  it  to  say  that  nations,  as  is  the  case  with  individuals, 
are  respected  by  others,  precisely  to  the  extent  to  which  such 
nations  cause  the  impression  to  prevail  that  they  respect  them- 
selves. 

Nothing  produces  an  impression  of  national  self-respect  so  com- 
pletely in  foreign  countries,  or  tends  so  much  to  the  development 
of  a  nation's  commerce,  with  the  exception  of  a  powerful  navy, 
as  dignified  provision  for  the  housing  of  its  official  representatives 
in  such  countries,  and  a  merchant  marine  carrying  its  wares  under 
its  own  flag  to  the  uttermost  parts  of  the  earth. 

We  have  had  a  powerful  navy  for  some  time  past.  We  shall 
soon  be  housing  our  representatives  and  the  valuable  archives  under 
their  charge  as  other  great  nations  do  theirs.     A        \  w^uld  appeal 

earnestly  to  every  commercial  body  in  this  country  to  S(_^ ..  ^  get 

a  merchant  marine  before  the  opening  of  the  great  international 
w^aterway  at  Panama;  that  work  of  Herculean  magnitude,  which 
it  wall  soon  have  been  the  glory  of  our  country  to  contribute  to  the 
promotion  of  international  commerce  and  to  the  immeasurable  bene- 
fit of  mankind. 


(593) 


THE  FOURTH  PAN-AMERICAN  CONFERENCE 


By  Paul  S.  Reinsch, 

Delegate   to   the   Fourth    Pan-American    Conference;    Professor   of   Political 

Science,  University  of  Wisconsin. 


The  Fourth  International  Conference  of  American  Republics 
was  held  in  Buenos  Ayres  in  the  months  of  July  and  August,  1910. 
The  Argentine  capital  was  the  scene  of  many  celebrations  and 
festivities  during  the  last  year  in  connection  with  the  centenary  of 
independence.  The  main  commemorative  celebration  took  place  in 
May  and  June,  at  which  time  special  embassies  from  a  great  many 
American  and  European  countries  were  present.  In  connection  with 
this  celebration  a  number  of  international  exhibitions  were  held 
which  extended  throughout  the  year.  There  was  an  international 
art  exposition .  and  exhibits  of  agriculture,  transportation,  deco- 
rative arts,  sanitary  methods  and  school  administration.  Both 
American  and  European  exhibits  were  represented  in  these  collec- 
tions, which  gave,  however,  an  opportunity  especially  for  a  study  of 
the  development  of  the  arts  and  sciences  in  the  different  countries 
of  America.  The  sessions  of  the  International  Conference  began 
after  the  close  of  the  special  commemorative  exercises,  but  the 
conference  itself  was  a  part  of  this  great  commemoration  of  South 
American  independence ;  and  it  is  certainly  a  notable  and  encouraging 
fact  that  after  one  hundred  years  of  independent  existence,  all  the 
American  republics  are  incorporated  in  an  organization  which  repre- 
sents the  effort  to  develop  among  them  the  relation  of  amity  and  of 
cultural  and  economic  intercourse.  Friendly  relations  existing 
among  the  republics  have  been  disturbed  only  at  rare  intervals 
during  this  past  century,  and  American  international  life  for  that 
period  has  been  the  most  peaceful  ever  recorded  for  so  large  an 
area  and  for  so  many  independent  nations. 

The  personal  composition  of  the  conference  is  of  some  interest 
as  indicating  the  manner  in  which  the  countries  cause  themselves 
to  be  represented  on  such  occasions.  The  honorary  presidency  of 
the  conference  was  bestowed  upon  Mr.  Philander  C.  Knox,  the 
American  secretary  of  state,  and  Sr.  Victorino  De  La  Plaza,  the 

(594) 


The  Fourth  Pan-American  Conference  17 

Argentinian  minister  of  foreign  affairs.  The  latter,  a  gentleman  of 
wide  experience,  especially  with  English  and  American  affairs, 
opened  the  conference  with  an  address  in  which  he  gave  a  striking 
expression  to  the  purposes  of  the  international  union.  He  spoke  of 
the  great  utility  and  advantages  of  these  conferences,  "which,  aside 
from  the  opportunity  they  afford  for  the  elucidation  of  those  matters 
of  common  interest  which  constitute  the  basis  of  their  programs, 
draw  closer  the  bonds  of  union  and  friendship  between  nations,  all 
of  which  are  moved  by  aspirations  toward  the  common  ideal  of 
liberty,  civilization  and  progress."  When  Sr.  De  La  Plaza  resigned 
from  the  ministry  in  order  to  become  vice-president  of  the  republic, 
his  successor,  appointed  ad  interim,  Sr.  Larreta,  was  elected  as  a 
third  honorary  president.  The  acting  president  of  the  conference 
was  Dr.  Antonio  Bermcjo,  the  chief  justice  of  Argentina.  A 
highly  trained  jurist  especially  versed  in  questions  of  international 
law,  a  judge  of  long  experience,  he  conducted  the  sessions  of  the 
conference  with  a  quiet  dignity  and  a  sure  hand.  He  was  effectively 
assisted  by  the  secretary-general,  Sr.  Epifanio  Portela,  who  had 
been  for  several  years  Argentinian  minister  at  Washington.  The 
Argentine  delegation  was  made  up  of  men  of  wide  experience  and 
acknowledged  ability.  Three  ex-ministers  of  foreign  affairs,  Sr. 
Montes  de  Oca,  Sr.  Larreta,  Sr.  Zeballos,  and  a  former  minister  of 
finance,  Sr.  Terry,  who  has  since  died,  represented  the  official 
experience ;  the  president-elect  of  Argentina,  Sr.  Saenz  Pena,  was 
also  a  delegate,  but  he  did  not  arrive  from  Europe  until  the  very 
end  of  the  conference.  The  Brazilian  delegation  was  especially 
brilliant,  being  headed  l)y  Senator  Murtinho,  one  of  the  most  experi- 
enced men  in  Brazilian  political  life.  It  included  two  senators  of  Sao 
Paulo,  Nogueira  and  de  Freitas,  Sr.  Da  Gama,  Brazilian  minister 
in  Buenos  Ayres,  Sr.  Da  Cunha,  who  won  the  hearts  of  everybody, 
not  only  by  his  brilliant  oratory,  but  through  the  genial  manner  in 
which  he  entertained  his  colleagues  on  all  occasions  with  a  wealth 
of  anecdote  and  reminiscence,  and  the  famous  poet,  Olavo  Bilac, 
who  illustrates  in  his  career  the  manner  in  which  Brazilians  are  apt 
to  combine  literary  and  political  life.  The  Chilian  delegation  also 
represented  a  great  breadth  of  experience  and  ability.  Sr.  Cruchaga, 
its  president,  is  the  Chilian  minister  at  Buenos  Ayres,  a  man  of 
genial  personality;  it  is  characteristic  that  all  of  the  political  parties 
of  Chile  were  represented  on   the  delegation,   which   included   Sr. 

(595) 


1 8  The  AiDials  of  the  American  Academy 

Cruz,  the  beloved  Chilian  minister  in  Washington  whose  recent 
death  is  mourned  by  all  who  knew  him,  Sr.  Bello,  member  of  the 
Second  Pan-American  Conference  and  grandson  of  the  first  great 
writer  on  international  law  in  South  America,  Sr.  Alvarez,  coun- 
selor of  the  Chilian  foreign  office  and  well-known  writer  on  inter- 
national law  subjects,  and  Sr.  Mathicu.  Among  the  personnel  of 
the  Chilian  delegation,  its  assessor,  Sr.  Phillipi,  ought  to  be  specially 
mentioned,  on  account  of  the  effective  assistance  he  gave  to  the  con- 
ference on  one  of  the  most  difficult  subjects  of  discussion,  the  mat- 
ter of  customs  regulations.  The  Cuban  delegation  was  headed  by 
the  genial  General  Garcia  Velez ;  and  it  counted  among  its  members 
Sr.  Montoro,  whose  reputation  as  a  great  parliamentary  orator  in 
the  Spanish  Cortes  has  been  augmented  by  his  later  work  and 
achievements,  a  man  whose  rare  personal  charm  and  dignity  endeared 
him  to  all  and  whose  oratorical  power,  sparingly  used  by  him,  is 
a  thing  always  to  be  remembered  by  those  who  have  heard  him. 
The  delegation  included  another  speaker  of  high  merit,  Sr.  Quesada, 
who  was  for  years  minister  in  Washington  and  who  now  represents 
the  Cuban  government  at  Berlin.  The  other  members  of  the  dele- 
gation were  Sr.  Perez,  president  of  the  Cuban  senate,  and  General 
Carbonell,  one  of  the  leading  authors  and  editors  of  the  republic. 
The  Mexican  delegation  represented  official  experience  in  the  person 
of  Sr.  Salado  Alvarez,  Sr.  Ramos  Pedrueza  and  Sr.  Esteva  Ruiz, 
while  the  academic  world  was  represented  by  Professor  Perez 
Verdia  of  the  University  of  Guadalajara.  Peru  had  sent  the  first 
vice-president  of  the  republic,  Sr.  Larrabure  y  Unanue,  who  was 
also  special  ambassador  of  his  country  at  the  centenary  celebration; 
with  him  were  associated  the  Peruvian  minister  at  Buenos  Ayres, 
Sr.  Alvarez  Calderon  and  Sr.  Lavalle  y  Pardo,  another  gentleman 
of  long  diplomatic  experience.  The  head  of  the  delegation  of 
Uruguay  was  the  veteran  diplomat,  Sr.  Gonzalo  Ramirez,  who  has 
long  been  looked  upon  as  one  of  the  leading  spirits  in  the  develop- 
ment of  international  law  in  South  America.  He  was  the  principal 
mover  in  the  codification  of  private  international  law  undertaken 
by  the  Congress  of  Montevideo  in  1889.  His  associates  were 
gentlemen  prominent  in  the  political  life  and  the  legal  profession 
of  their  country.  The  countries  here  enumerated  are  those  which 
had  larger  delegations.  The  commissioners  of  those  countries 
which  had  only  one  or  two  delegates  similarly  illustrate  the  repre- 

(596) 


The  Fourth  Pan-American  Conference  19 

sentative  character  of  the  assemblage.  There  were  diplomats  like 
Sr.  Volio  of  Costa  Rica,  Sr.  Ancizar  of  Colombia,  Sr.  Toledo 
Herrarte  of  Guatemala,  Dr.  Lazo  of  Honduras,  Sr.  Porras  of 
Panama  and  Sr.  Mejia  of  Salvador,  while  other  men  represented 
the  legal  and  medical  professions  and  political  experience  gained 
in  national  congresses,  Venezuela  was  represented  by  two  of  her 
most  noted  literary  men  and  publicists,  Senor  Manual  Diaz  Rodriguez 
and  Senor  Cesar  Zumeta.  From  this  brief  survey  of  the  personnel  of 
the  conference,  it  will  be  seen  that  it  was  representative  of  the 
official  experience  and  scientific  expertship  in  political  matters 
within  these  countries.  Though  coming  from  widely  different  fields 
of  activity  and  countries  separated,  not  only  by  distance  in  space, 
but  divergences  in  social  and  economic  development,  they  yet  for  ned 
a  group  of  men  who,  as  they  became  acquainted  with  one  another, 
co-operated  in  a  spirit  of  frankness  and  sincere  friendship.  The 
personal  relations  formed  upon  an  occasion  like  this  are  of  them- 
selves of  significance  and  value.  Nuclei  of  mutual  understanding 
are  established  and  relations  begin  to  grow  up  by  which  the  different 
countries  are  brought  much  closer  together  as  they  learn  to  mutually 
understand  and  sympathize  with  one  another. 

The  program  of  the  conference  had  been  settled  on  the  basis 
of  instructions  by  the  various  governments  of  the  union,  by  the  gov- 
erning board  of  the  international  bureau  at  Washington.  Aside 
from  formal  matters  of  acknowledgment  and  comme;noration,  it 
included  the  consideration  of  the  following  subjects:  improvements 
in  the  organization  of  the  Pan-American  Union,  the  completion  of 
the  Pan-American  railway,  the  establishment  of  a  more  rapid  steam- 
ship service  between  the  republics,  uniformity  in  consular  docu- 
ments and  customs  regulations,  international  sanitation,  arrange- 
ments concerning  copyright,  patents  and  trade  marks,  treaties  on 
the  arbitration  of  pecuniary  claims,  and  the  interchange  of  professors 
and  students  among  the  American  universities.  The  regulations 
and  rules  of  procedure  had  also  been  fixed  by  the  governing  board, 
so  that  the  conference  could  immediately  address  itself  to  the  task 
of  working  out  treaties  and  resolutions  on  the  subjects  of  the  pro- 
gram. Fourteen  committees  were  appointed,  among  which  the  busi- 
ness of  the  conference  was  distributed.  Thereafter  for  a  while  the 
conference  took  up  only  formal  matters,  giving  the  committees 
time  and  opportunity  for  a  thorough  discussion  of  their  respective 
subjects.      The    manner   in    which    the    conference   proceeded    was 

(597) 


20  The  .Iniials  of  the  America)!  Academy 

exceedingly  business-like.  It  did  not  spend  its  efforts  in  spectacu- 
lar oratory,  somewhat  to  the  disappointment  of  the  local  press,  but 
it  directed  itself  quietly  and  persistently  to  the  accomplishment  of 
the  purposes  before  it, — that  is  to  improve,  in  general  bearing  and 
detail,  the  relations  between  the  republics  along  the  lines  determined 
by  the  program  of  the  conference. 

It  is  invariably  the  case  that  when  a  conference  representing 
a  large  number  of  governments  is  called  together,  extravagant  expec- 
tations are  entertained  as  to  what  results  it  can  bring  about.  The 
layman  is  apt  to  look  at  a  conference  of  this  kind  as  representing 
the  sum  of  the  energies  of  all  the  countries  concerned.  It  is,  there- 
fore, his  expectation  that  results  of  striking  and  immediately  effect- 
ive character  should  be  produced.  In  the  case  of  the  Fourth  Con- 
ference, too,  the  outside  world  feigned  disappointment  that  the 
radical  reform  of  the  entire  American  world  was  not  immediately  to 
be  brought  about.  The  program  was  criticized  as  being  too  narrow, 
as  not  allowing  full  play  to  the  energies  thus  brought  together. 
This  view  even  found  expression  on  the  floor  of  the  conference 
through  the  Dominican  delegate.  But  it  represents  a  misconception 
of  the  functions  of  an  international  conference,  which  does  not 
represent  the  utmost  that  the  combined  energies  of  the  countries 
concerned  might  bring  about,  but  the  utmost  which  they  can  agree 
upon  with  practical  unanimity.  Its  work  must,  therefore,  aim  to 
be  entirely  practical,  based  upon  ascertained  needs  of  international 
relations  and  traffic.  The  general  ideals  of  American  international 
life,  would,  of  course,  also  be  considered  and  developed  on  such 
occasions ;  but  concrete  results  can  be  expected  only  as  detailed  and 
practical  improvements  are  introduced  in  the  machinery  of 
international  intercourse. 

Working  upon  this  practical  basis,  the  several  committees  of 
the  conference  addressed  themselves  to  questions  of  detail,  leaving 
aside,  for  the  most  part,  the  rather  fruitless  field  of  theoretical  dis- 
cussions. Indeed  it  may  be  said  that  the  transactions  of  the  com- 
mittees were  not  only  highly  interesting  because  of  the  differences 
of  the  points  of  view  and  experiences  represented,  but  that  they 
were  also  notable  for  the  practical  sense  displayed  and  the  readiness, 
after  thorough  discussion,  to  compromise  upon  matters  of  detail. 
After  a  few  weeks  of  careful  work  and  intense  discussion,  all  of 
the  committees  brought  forward  drafts  of  resolutions  and  treaties 

f598) 


The  Fourth  ran-Amcrica)i  Conference  21 

which  were  then  adopted  by  the  conference  witli  practical  unanim- 
ity. The  work  of  the  conference  as  it  hes  before  us  in  complete 
form  represents  on  a  number  of  points  a  definite  advance  in  the 
de\*elopment  of  American  treaty  relations.  The  conference  was 
not  called  together  to  originate  any  new  lines  of  action,  but  to 
elaborate  further  those  matters  which  had  already  been  taken  up  by 
former  conferences  and  to  introduce  such  improvements  in  detail 
as  would  make  their  working  more  smooth  and  make  them  as  a  whole 
more  acceptable  to  the  American  countries.  The  organization  of 
the  international  union  itself  was  simplified  and  improved.  The 
name  of  the  bureau  at  Washington  was  changed  to  "Pan-American 
Union"  in  order  to  recognize  the  importance  gained  by  this  useful 
institution ;  the  name  of  the  organization  in  its  entirety  was  changed 
to  the  briefer  form,  "Union  of  American  Republics."  A  draft 
convention  was  elaborated,  in  which  the  organization  of  the  union 
and  its  functions  are  laid  down  in  a  simple  form,  so  that  when 
ratified  this  instrument  may  serve  as  a  constitutional  charter.  New 
impulse  was  given  to  the  further  development  of  the  branches  of 
the  Pan-American  Union  which,  in  the  form  of  Pan-American  com- 
mittees, or  commissions,  have  been  established  in  each  one  of  the 
countries.  Treaties  were  adopted  for  the  mutual  protection  of 
patents,  trade  marks,  and  copyrights.  These  treaties  provide  for 
the  establishment  of  registry  offices  at  Havana  and  at  Rio  de  Janeiro. 
In  the  substance  of  the  provisions  introduced,  with  respect  to  the 
law  of  patents  and  copyrights,  they  follow  the  latest  European  or 
world-wide  experience,  embodied  in  the  treaties  of  Berne,  Berlin 
and  Brussels.  The  treaty  for  the  arbitration  for  pecuniary  claims, 
which  was  first  adopted  at  Mexico  in  1902  and  re-enacted  at  Rio 
de  Janeiro,  was  again  renewed  after  very  thorough  discussion  in 
the  committee.  Many  interesting  points  of  international  law  arose, 
as  it  was  suggested  by  members  of  the  committee  that  the  sovereign 
authority  of  the  individual  states  should  be  safeguarded  by  pro- 
viding for  arbitration  only  in  case  of  denial  of  justice  by  the  local 
courts.  But  finally  the  treaty  was  adopted  in  its  more  general  form, 
a  great  gain  for  international  arbitration,  as  every  limitation  imposed 
in  a  treaty  would  act  as  an  impediment  to  fullest  eiTectiveness.  In 
matters  of  sanitation  the  results  of  the  various  sanitary  conferences 
held  in  the  international  union  since  the  conference  of  Rio  were 
approved  and  the  adoption  of  their  recommendations  advised.    The 

(599) 


22  The  Annals  of  the  American  Academy 

latter  refer  not  only  to  quarantine  but  also  to  the  effectiveness  of 
sanitation  in  regions  exposed  to  infectious  diseases.  On  the  difficult 
subject  of  customs  and  consular  regulations  it  was  possible  to 
arrive  at  an  agreement  which,  if  carried  out  by  the  republics,  will 
result  in  material  improvement  of  the  conditions  of  international 
commerce.  By  adopting  standard  forms  for  consular  documents, 
a  uniform  scale  as  to  the  amount  of  consular  fees,  and  recommenda- 
tions with  respect  to  customs  administration,  the  conference  led  the 
way  toward  the  abandonment  of  methods  that,  on  account  of  local 
differences,  constitute  a  serious  impediment  to  commerce  in  many 
cases.  With  respect  to  the  Pan-American  railway,  the  work  of  the 
existing  permanent  committee,  headed  by  ex-Senator  Davis,  received 
recognition,  and  it  was  resolved  that  special  efforts  shall  be  made 
to  bring  to  a  conclusion  this  important  undertaking  through  co- 
operation between  the  countries  concerned. 

A  subject  that  appeared  for  the  first  time  on  the  program  of 
a  Pan-American  conference  was  the  interchange  of  university  pro- 
fessors and  students.  It  was  felt  that  such  a  mutuality  of  educa- 
tional life  would  exercise  a  beneficent  influence  on  the  general  rela- 
tions among  the  republics  of  America.  American  countries  would 
mutually  benefit  from  the  scientific  experience  of  one  another, 
as  the  problems  by  which  they  are  confronted  in  their  economic 
and  political  development,  often  receive  special  illustration  from 
what  has  been  achieved  in  one  or  the  other  of  these  republics.  Agen- 
cies for  the  spread  of  such  knowledge  and  information  are  impor- 
tant to  the  welfare  of  all.  But  beyond  this,  the  personal  relations 
established  through  such  an  interchange  of  students  and  teachers 
would  serve  to  make  much  closer  the  bonds  of  friendship  and  mutual 
sympathy  which  now  unite  the  American  nations.  Only  a  first 
impetus  could  be  given  to  this  matter  by  the  conference,  as  data 
were  still  lacking  as  to  what  the  educational  institutions  of  the 
different  countries  were  desirous  and  able  to  do  in  the  matter  of  such 
an  interchange,  but  resolutions  were  passed  recognizing  the  desira- 
bility of  establishing  it  on  a  systematic  basis.  The  work  done  by  the 
Pan-American  Scientific  Congress,  held  at  Santiago  in  1908,  was 
also  formally  recognized  and  appreciated,  and  attention  was  called 
to  the  Second  Pan-American  Scientific  Congress,  which  is  to  hold 
its  sessions  in  Washington  in  191 2. 

The  treaties  adopted  by  the  Pan-American  conference  and  the 

(600) 


The  Fourth  Paii-jlincrkan  Conference  2^^ 

recommendations  put  forward  by  it,  require  ratification  by  the  dif- 
ferent governments  before  they  can  fully  go  into  effect.  In  this 
connection  it  is  important  to  remember  that  the  treaties  adopted  at 
the  conference  of  Rio  in  1906  were  all  ratified  by  a  large  majority 
of  the  American  states/  and  are,  therefore,  in  force  as  to  those 
countries.  In  this  respect  the  work  of  the  Pan-American  confer- 
ences has  become  constantly  more  efl:ective.  The  first  conferences 
had  to  feel  their  way.  The  whole  world  of  possible  means  lay  before 
them,  and  they  had  to  select  those  lines. of  common  action  which 
promised  effective  results.  The  later  conferences,  building  upon 
these  tentative  efforts  of  the  earlier  ones,  have  succeeded  in  elaborat- 
ing a  system  of  treaties  which  has  proved  in  practice  acceptable  to 
the  American  republics.  But  even  in  matters  upon  which  treaties 
have  not  been  directly  adopted,  the  work  of  the  conferences  has  had 
a  decided  influence  in  affording  opportunity  for  the  gathering  up 
of  American  experience,  for  the  clarifying  of  opinion,  and  for  the 
determination  as  to  what  line  of  action  it  is  desirable  to  pursue  and 
what  objects  may  be  striven  for  with  a  hope  of  ultimate  success. 
The  conference  has  become  a  clearing  house  of  American  political 
experience  and  opinion,  and  as  it  has  decided  to  devote  attention  to 
matters  of  detail,  its  work  will  be  progressively  improved,  so  that 
each  conference,  instead  of  approaching  only  new  problems,  will  be 
carried  a  step  further  toward  the  solution  of  the  difficulties  already 
considered  by  its  predecessors.  Comprehensive  information,  sym- 
pathy founded  on  real  mutual  understanding,  and  steady  progress 
in  the  detailed  solution  of  American  problems,  all  these  things  are 
assuredly  being  realized  in  the  institution  known  as  the  Union  of 
American  Republics. 

Not  the  least  advantage  gained  from  these  meetings,  however, 
lies  in  that  mutual  knowledge  and  understanding  between  the  tv;o 
great  branches  of  the  American  world,  the  traditions  and  hisiory  of 
Avhich  had  formerly  taken  separate  paths.  Upon  such  well-founded 
mutual  confidence  and  mutual  helpfulness  depends  the  future  peace 
and  welfare  of  our  continent,  nor  are  such  friendly  relations 
anything  but  a  benefit  to  the  rest  of  the  world. 

^Detailed  data  on  these  matters  are  given  in  Reinsch,   "International    Unions,"   cli.    3 
(Ginn&  Co.,  1911). 


(6oi) 


THE  MONROE  DOCTRINE  AT  THE  FOURTH  PAN- 
AMERICAN  CONFERENCE.! 


Bv  The  Honorable  Alejandro  Alvarez, 

Of   the    Chilean    Ministry    of    Foreign    Affairs,    Santiago,    Chile. 


So  much  has  been  written  and  said,  especially  of  late,  upon  the 
subject  of  the  Monroe  Doctrine,  that  even  among  people  of  enlight- 
enment, a  real  confusion  of  ideas  has  arisen.  Even  works  upon 
International  Law  have  not  been  exempt  from  lapses  and  inexacti- 
tudes in  this  regard.  This  confusion  is  due  to  the  fact  that  no 
distinction  is  ordinarily  made  in  what  has  come  to  be  known  as  the 
"Monroe  Doctrine"  between  the  principles  which  properly  belong  to 
it  and  certain  trends  of  policy  which  are  foreign  to  it.'-  Distinctions 
should  be  made  between  (i)  the  Monroe  Doctrine  in  its  primitive 
form;  (2)  the  hegemony  of  the  United  States  on  the  American 
Continent;  and  (3)  the  imperialistic  policy  of  that  nation.  The 
Monroe  Doctrine,  properly  speaking,  was  simply  the  result  of 
the  necessity  felt  by  all  of  the  states  of  the  New  World  of  making 
their  independence  secure  against  the  ambitions  of  Europe,  a 
necessity  resulting  from  the  triumphs  of  their  independence.  The 
statesmen  of  the  new  nations  realized  then  that  their  people  must 
unite  for  such  a  purpose.  These  aims,  which  had  not  yet  been 
definitely  formulated,  were  crystallized  in  1823,  by  the  famous 
message  of  President  Monroe.  The  declarations  of  an  inter- 
national character  contained  in  this  document  may  be  reduced  to 
three : 

1.  No  European  country  may  gainsay  the  right  gained  by  the 
nations  of  the  New  World  to  their  independence  and  sovereignty. 

2.  The  right  is  recognized  of  these  same  American  nations  to 
organize  such  forms  of  government  as  best  suit  their  interests 
without  the  intervention  by  any  European  country  in  the  affairs 
relating  to  internal  regulation,  and 

^The  Academy  desires  to  express  its  appreciation  to  Layton  D.  Register,  Esq., 
of  the  Law  Department  of  the  University  of  Pennsylvania,  for  the  translation  of 
this  article. 

=1  have  devoted  to  just  this  suh.iect  a  great  part  of  my  book  published  a  short 
time  ago  In  Paris  :  "Le  Droit  International  American. " 

(602) 


Monroe  Doctrine  at  Fourth  Pan-American  Conference       25 

3.  European  nations  are  prohibited  from  acquiring  by 
occupation    any    part    of    the    American    Continent. 

These  declarations,  by  their  preciseness  and  definiteness,  became 
henceforth  the  pohtical  creed  of  all  the  nations  of  the  New  World. 
They  made  clear,  likewise,  the  bond  of  union  which  then  existed 
not  only  among  the  Latin  Republics  of  the  continent  but  also  between 
them  and  the  United  States.  And  this  is  so  true  that  all  those  nations 
strove  for  the  solemn  proclamation  of  the  Monroe  Doctrine  at  the 
American  International  Congress  which  met  at  Panama  in  1826. 
Shortly  after  its  formulation  by  President  Monroe,  the  United 
States,  as  the  strongest  and  most  influential  nation,  became  the 
champion  of  this  doctrine,  and  its  acceptation  by  the  other  Ameri- 
can republics  was  later  confirmed  by  numerous  declarations  of  the 
state  departments,  and  by  different  cases  of  practical  application  in 
which  the  chief  moving  spirit  was  that  same  Republic  of  the  North. 
From  this  has  arisen  the  mistaken  belief  that  the  Monroe  Doctrine 
is  merely  a  rule  of  policy  adopted  by  the  United  States  and  exercised 
for  its  sole  and  exclusive  benefit,  whereas  in  reality  it  is  a  union  of 
declarations  which,  by  reflecting  faithfully  the  aims  of  a  whole 
continent,  and  by  the  constant  application  it  has  received,  possesses 
all  the  characteristics  of  an  American  principle  of  international  law. 

New  needs  arising  out  of  the  foreign  policy  of  these  countries 
have  caused  several  amplifications  of  this  doctrine,  and  they  too 
have  been  accepted  by  all  the  nations  of  the  continent.  These  am- 
plifications establish  that  no  European  country  may  acquire,  no 
matter  what  the  motive,  any  portion  of  the  New  World,  nor  tem- 
porarily occupy  all  or  part  of  a  country  even  upon  the  pretext  of  civil 
or  foreign  war.  The  pretension  has  also  been  made  that  those  am- 
plifications of  the  doctrine  apply  not  only  as  against  European 
States,  but  even  among  the  American  nations  themselves.  But  this 
])retension  has  not  passed  beyond  the  stage  of  a  mere  Utopia,  since 
it  has  not  been  formally  adopted  with  that  unanimity  which  exists 
in  the  case  of  its  application  to  European  powers.  Moreover  it 
has  always  been  violated  in  practice. 

If  the  Alonroe  Doctrine  and  its  more  transcendental  amplifica- 
tions have  been  confirmed  by  express  declarations  from  all  the  state 
departments  of  the  American  continent,  the  same  cannot  be  said 
to  have  happened  in  the  case  of  the  other  two  elements  which  are 
generally  conferred  with  it,  i.  e.,  hegemony  and  imperialism.    This 

(603) 


26  I  Jic  .hiiuils   of  tlic   .Uncrican   .icademy 

doctrine  of  hegemony  or  leadership  is  simply  a  rule  of  policy  of  the 
United  States  which  consists  of  imposing  the  opinions  of  her  State 
Department  upon  America  at  large,  whenever  the  former's  interests 
are  concerned,  and  of  intervening  in  the  internal  and  external  affairs 
of  any  country  of  Latin-America  in  order  to  protect  the  interests  of 
the  United  States  and  ostensibly  to  watch  over  the  prestige  of  the 
Latin-American  republics.  This  policy  affects  almost  exclusively 
the  countries  bordering  upon  the  Caribbean  Sea.  It  is  obvious  that 
this  attitude  of  the  United  States  does  not  always  coincide  with 
the  wishes  of  the  South  American  continent;  that,  on  the  contrary, 
it  is  considered,  upon  occasions,  to  be  a  menace  to  the  integrity  and 
sovereignty  of  certain  republics  of  this  hemisphere.  The  imperial- 
ism of  the  United  States  is  another  rule  of  political  action  which 
also  fails  to  find  an  echo  in  the  opinion  of  South  America.  This 
policy  is  exercised  within  a  broader  sphere  than  that  of  hegemony. 
As  in  the  case  of  the  imperialism  of  the  great  European  powers,  one 
principal  object  of  the  United  States  is  the  development  and 
expansion  of  her  commerce  and  the  opening  of  new  markets  in 
different  continents  until  there  shall  be  established  a  political  and 
economic  supremacy  throughout  the  civilized  world. 

Thus  we  see  that  the  policies  of  hegemony  and  imperialism  of 
the  United  States,  which  are  currently  confused  with  the  Monroe 
Doctrine,  especially  in  Europe,  are  not  principles  of  American  inter- 
national law,  since  they  do  not  receive  the  adhesion  of  both  the 
Americas.  Only  when  stripped  of  these  two  elements  does  the 
Monroe  Doctrine  appear  in  its  true  light,  the  doctrine  of  a  continent. 

Having  made  these  preliminary  explanations,  which  are  neces- 
sary for  a  perfect  comprehension  of  what  occurred  at  Buenos  Aires 
to  the  Brazilian  resolution,  concerning  the  Monroe  Doctrine,  I  will 
now  enter  upon  the  examination  of  the  events  to  which  this  project 
gave  rise  and  of  the  attitude  which  our  delegation  assumed  on  that 
occasion.  In  the  middle  of  last  July,  the  Brazilian  Minister  at 
Buenos  Aires,  his  Excellency  Senor  Da  Gama,  explained  to  several 
members  of  the  Chilean  delegation  that  the  late  Ambassador  of  his 
country  to  the  United  States,  his  Excellency  Seiior  Nabuco, 
had  cherished  the  idea  of  presenting  to  the  Conference  at 
Buenos  Aires  a  motion  which  would  evidence  the  recognition  by  all 
the  countries  of  America  of  the  fact  that  the  Monroe  Doctrine  had 
been  beneficial  to  them.    Nabuco  had  left  in  writing  a  formal  declara- 

(604) 


Monroe  Doctrine  at  I'oiirtli  Pa)i-Anicrican  Conference        27 

tion,  which  the  Government  of  Brazil,  out  of  respect  to  the  memory 
of  the  great  statesman,  desired  to  present  to  the  Conference  without 
any  change.  His  Excellency  Senor  Da  Gama  added  that  his  gov- 
ernment was  desirous  of  counting  in  this  move  upon  the  co-operation 
of  Argentine  and  Chile.  The  proposition,  furthermore,  was  to  be 
presented  only  in  case  the  acquiescence  of  all  the  other  delegations 
could  be  counted  on  beforehand,  so  that  it  would  be  approved  with- 
out criticism.  In  order  not  to  go  outside  of  the  program  of  the 
Conference,  the  motion  was  to  be  proposed,  not  as  a  declaration  of 
principles,  but  as  a  testimonial  of  appreciation  presented  by  Latin- 
America  to  the  United  States  upon  the  occasion  of  the  first  centen- 
nial of  its  independence.  The  resolution  of  Nabuco,  endorsed  by 
the  Brazilian  delegation,  was  in  these  words :  "The  long  period 
which  has  transpired  since  the  declaration  of  the  Monroe  Doctrine, 
permits  us  to  recognize  in  it  a  permanent  factor  making  for  inter- 
national peace  upon  the  American  Continent.  For  this  reason,  while 
celebrating  her  first  efforts  towards  independence,  Latin-America 
sends  to  her  Great  Sister  Nation  of  the  North,  an  expression  of  her 
thanks  for  that  noble  and  unselfish  action  which  has  been  of  such 
great  benefit  to  the  entire  New  World."  Without  any  formal  and 
concrete  proposition  having  yet  been  placed  by  the  Brazilian  delega- 
tion before  the  Chilean  delegation  upon  the  question  of  the  presen- 
tation in  common  of  this  project  to  the  assembly,  we  members  of  the 
latter  were  in  accord  in  considering  the  resolution,  as  framed,  very 
categoric  in  its  terms,  especially  in  view  of  the  confusion  which  I 
have  shown  to  exist  regarding  what  should  in  reality  be  under- 
stood by  the  Monroe  Doctrine. 

For  my  part,  I  presented  to  Senor  Da  Gama,  simply  as  grounds 
for  consideration,  and  not  as  the  opinion  of  the  Chilean  delegation, 
another  form  of  resolution,  which  in  my  judgment,  obviated  those 
objections,  and  which  contained,  along  with  a  statement  of  the 
principles  of  the  doctrine,  a  declaration  of  the  fact  that  these  prin- 
ciples had  the  support  of  the  entire  American  Continent.  ]\Iy  pro- 
posed resolution  was  couched  in  the  following  terms:  "Since  their 
independence,  the  nations  of  America  have  proclaimed  the  right 
thereby  acquired  of  excluding  European  intervention  in  their  in- 
ternal affairs,  and,  also,  the  principle  that  the  territory  of  the  New 
World  cannot  be  made  the  object  of  future  colonization.  These 
principles  clearly  formulated  and  solemnly  expressed  by  President 

(605) 


28  The  Annals  of  the  American  Academy 

Monroe  in  1823  constitute  a  factor  which  has  contributed  towards 
guaranteeing  the  sovereignty  of  the  nations  of  this  continent. 
Wherefore,  Latin-America,  celebrating  the  one  hundredth  anniver- 
sary of  her  independence,  sends  now  to  her  Great  Sister  Nation  of 
the  North,  the  expression  of  her  adhesion  to  that  idea  of  sohdarity, 
as  in  the  past  she  joined  her  in  proclaiming  those  principles  and  up- 
holding them  for  the  benefit  of  the  entire  New  World." 

Senor  Da  Gama  found  in  this  resolution  a  departure  from  that 
of  Nabuco,  which  his  government  was  desirous  at  all  costs  to  pre- 
serve. Shortly  afterwards,  we  personally  agreed  upon  a  new 
formula,  which  he  was  to  submit  to  his  government  and  which, 
when  approved  by  it,  was  to  be  placed  before  the  delegations  of 
Chile  and  Argentine.  This  formula  was  as  follows:  "The  long 
period  which  has  transpired  since  the  declaration  of  the  Monroe 
Doctrine  permits  us  to  recognize  in  it  a  permanent  factor  making 
for  external  peace  upon  the  American  continent.  It  gave  concrete 
and  solemn  expression  to  the  aims  of  Latin-America  from  the  com- 
mencement of  her  political  independence.  For  this  reason,  while 
celebrating  the  centennial  of  her  first  efforts  towards  independence, 
the  nations  represented  in  the  Fourth  Pan-American  Conference 
send  to  their  Great  Sister  Nation  of  the  North,  the  expression  of 
their  adhesion  to  that  noble  and  unselfish  action,  of  such  beneficial 
consequence   for  the  New  World." 

Having  consulted  the  Brazilian  Government,  his  Excellency 
Sefior  Da  Gama  believed  the  time  ripe  to  ask  for  the  approval  of  this 
resolution  by  the  delegations  of  Argentine  and  Chile.  The  members 
of  the  former,  with  two  exceptions,  expressed  themselves  in  favor  of 
it  as  drawn  up.  The  Chilean  delegation,  for  its  part,  attentively 
studied  the  proposed  resolutions,  and  while  entirely  agreeing  with  the 
propositions  of  the  Brazilian  delegates,  they  yet  believed  that  an- 
other formula  must  be  sought  which,  while  it  brought  the  proposi- 
tion within  the  program  of  the  conference,  did  not  lend  itself  to 
false  interpretations  by  Europe,  the  United  States,  and  the  rest  of 
America. 
^  The  proposition  formulated  by  the  Chilean  delegation  was  the 

following:  "LTpon  celebrating  the  centennial  of  their  first  efforts 
towards  political  independence,  the  nations  represented  in  the  Fourth 
Pan-American   Conference   send  to   their   Great   Sister   Nation   of 


(606) 


Monroe  Doctrine  at  Fourth  Fan-American   Conference       29 

the  North  the  expression  of  their  thanks  and  record  their  convic- 
tion that  the  declarations  contained  in  the  message  of  President 
]\Ionroe  met  the  aims  of  all  America  and  contrihuted  effectively 
to  guarantee  its  independence." 

The  members  of  other  delegations,  in  their  turn,  learned  con- 
fidentially of  the  proposition  which  the  Brazilian  delegation  were 
supporting  and  though  in  favor  of  the  idea  and  motive  which  were 
guiding  the  Brazilian  Government,  they  believed  that  it  was  neces- 
sary to  make  some  additions  in  which  it  would  be  made  clear  that 
the  Monroe  Doctrine  must  not  be  understood  as  an  impairment  of 
the  sovereignty  of  the  Latin-American  States.  The  point  had  been 
reached  of  formulating  the  additions  which  were  to  be  made  to  the 
proposed  resolution,  inspired  by  a  speech  made  by  the  Secretary  of 
State,  Mr.  Root,  at  the  third  convention.  And  there  were  not  want- 
ing those  who,  in  spite  of  these  additions,  thought  that  the  motion 
was  outside  the  program  of  the  Conference,  and  that,  while  approv- 
ing it,  they  might  sanction  along  with  it  many  acts  of  hegemony 
committed  by  the  United  States  by  wdiich  more  than  one  country 
had  felt  its  sovereign  dignity  to  have  been  wounded. 

This  now  considerably  complicated  the  situation.  The  delega- 
tion of  the  United  States,  consulted  in  regard  to  it,  made  it  clear 
that  it  would  be  very  acceptable  for  Latin-America  to  make  the 
Monroe  Doctrine  hers;  but  that  if  in  doing  this  she  was  going 
to  create  dissensions  in  the  midst  of  the  assembly,  it  was  preferable 
to  make  no  presentation  at  all.  The  Brazilian  delegation  thus 
realized  that  an  unanimous  assent  to  its  views  was  not  easy  to  obtain ; 
for  though  every  one  agreed  as  to  the  basic  reasons  of  the  resolution, 
it  was  very  difficult  to  reduce  it  to  a  brief  form,  and  satisfactory 
to  everybody.  Li  view  of  this,  the  delegation  did  not  insist  upon 
pushing  its  project. 

Therefore,  in  regard  to  the  Monroe  Doctrine  at  the  Pan- 
American  Conference  of  Buenos  Aires,  it  may  be  said  to  have  been 
clearly  established : 

1.  That  all  the  countries  of  America  there  represented  were 
agreed  that  the  Monroe  Doctrine,  as  it  was  formulated  in  1823,  is 
in  accord  with  the  aims  of  the  New  World  and  forms  a  part  of  its 
public  law; 

2.  That  the  delegation  from  Chile  at  all  times  manifested  the 
greatest  willingness  to  propose  to  the  conference  a  resolution,  con- 

(607) 


30  The  Annals  of  the  American  Academy 

else  and  satisfaetory,  yet  in  conformity  with  the  program  of  the 
conference. 

3.  That  it  was  very  difficult,  nevertheless,  to  find  a  wording, 
which  without  exciting  the  susceptibility  of  Europe,  would  be 
satisfactory  to  all  the  countries  of  America,  because  there  were 
various  states  which  desired  to  see  incorporated  with  the 
principles  of  that  doctrine,  other  principles  which  might  have  refer- 
ence to  the  policy  of  hegemony  of  the  United  States. 

4.  That  the  fact  that  this  formula  was  not  hit  upon  in  no  way 
signified  that  Brazil  had  received  a  diplomatic  rebuff;  and 

5.  That  the  Monroe  Doctrine  in  its  primitive  form,  was  not 
disavowed  in  the  Fourth  American  International  Conference.  It 
was  not  there  a  question  of  proclaiming  the  Monroe  Doctrine,  but 
only  of  recognizing  a  historical  fact  Avhich  during  the  past  century 
has  dominated  the  political  life  of  the  nations  of  the  New  World, 
and  is  to-day  the  basis  of  what  may  be  termed  American  Inter- 
national Law. 


(608) 


BANKING  IN  MEXICO 


By  the  Hon.  Enrique  Marti nez-Sobral, 
Chief  of  the  Bureau  of  Credit  and  Commerce  of  the   Mexican  Ministry  of 

Finance. 


The  development  of  banking  in  Mexico  is  one  of  the  most  im- 
portant features  of  the  Mexican  economic  improvement  during  the 
last  thirty  years. 

Banking  did  not  make  its  appearance  here  as  a  state  institution 
but  as  the  result  of  investments  of  foreign  capital,  attracted  by  the 
discovery  of  a  great  field  for  business,  as  soon  as  the  country  was 
able  to  establish  peace  firmly,  after  the  tremendous  struggles  which 
followed  the  war  for  independence  and  lasted  until  the  final  triumph 
of  the  republican  system. 

In  the  ten  years  following  the  war  with  France,  from  1870  to 
1880,  public  credit  was  of  no  importance,  and  the  financial  relations 
between  ]\Iexico  and  Europe  were  practically  nil;  but  during  those 
years  the  construction  of  our  big  railroad  systems  was  pushed  very 
energetically,  peace  was  assured,  and  the  resources  of  the  country 
became  apparent  to  the  eye  of  foreign  money  owners,  always  look- 
ing for  sound  and  productive  investments. 

Several  French  and  Mexican  business  men  united  to  establish 
a  bank  of  issue  in  Mexico  City ;  and,  supported  by  the  government, 
which  granted  to  them  a  liberal  charter,  founded  the  Mexican  Na- 
tional Bank.  A  few  months  later,  Mexican  and  Spanish  capitalists 
established  the  Mercantile  Bank.  The  competition  between  these 
two  institutions  culminated  in  their  merger,  and  the  present  National 
Bank  of  Mexico  was  thus  created.  Though  not  a  state  bank,  this 
financial  institution  was  authorized  by  the  government,  connected 
with  it  in  many  respects,  subject  to  its  supervision,  and  endowed 
with  something  very  much  resembling  a  monopoly  of  the  right  of 
issuing  banknotes. 

Nevertheless,  the  monopoly  was  not  clearly  defined  in  the  char- 
ter ;  it  was,  besides,  in  opposition  to  the  constitution  of  the  country ; 
no  law  existed  restraining  the  freedom  of  issue,  and  very  soon  other 
banks  appeared  on  the  scene,  such  as  the  London  and  Mexico  Bank, 

(609) 


^2  The  Aiuials  of  tJic  American  Academy 

which  purchased  an  old  and  nearly  forgotten  charter  granted  to  a 
bank  which  had  never  done  anything  serious  in  the  way  of  business; 
the  Nuevo  Leon  Bank,  the  Dnrango  Bank  and  others,  to  which  the 
Federal  Government  had  granted  charters,  somewhat  ignoring  the 
not  very  clear  nor  legal  monopoly  granted  to  the  National  Bank. 

A  mortgage  bank,  also  established  by  virtue  of  a  charter  from 
the  government,  began  operations  under  the  name  of  The  Interna- 
national  and  Mortgage  Bank. 

There  was  no  definite  system  for  granting  these  charters ;  it 
was  not  even  stated  in  a  clear  manner  wdiether  the  government  had 
a  right  to  grant  them,  nor  were  the  different  charters  founded  upon 
the  same  principles  of  banking;  in  short,  the'whole  matter  was  soon 
in  a  state  of  great  confusion. 

The  National  Bank  had  gradually  developed  its  business,  and 
through  its  different  branches  established  in  the  principal  towns  of 
the  country  had  contributed  to  the  awakening  of  economic  activi- 
ties; the  ground  had  been  thus  prepared  for  the  business'of  banking 
and  it  was  urgent  to  face  the  difficulties  arising  from  the  operations 
of  other  banks  of  issue,  with  a  view  to  their  settlement. 

In  1897,  the  moment  arrived  to  put  order  in  the  banking  trade 
and  a  law  was  enacted  by  the  government,  with  the  necessary  au- 
thority from  Congress,  and  accepted  by  the  National  Bank,  thereby 
forsaking  its  doubtful  privileges. 

The  other  existing  banks  also  submitted  to  the  law  (in  different 
ways)  and  the  whole  system  was  thus  founded,  as  far  as  possible, 
upon  a  homogeneous  basis. 

The  following  statement  of  the  principles  wdiich  govern  the  \di\v 
of  1897  will  lead  to  its  right  understanding: 

(i)  Plurality  in  the  monopoly,  that  is  to  say:  the  authority  for 
doing  a  certain  set  of  well  defined  banking  operations,  granted  not 
to  one  bank  only,  but  to  many  chartered  banks,  to  the  exclusion  of 
any  other  institution. 

(2)  The  banks  must  be  operated  under  the  form  of  limited 
companies  duly  organized  in  Mexico  and  subject  to  Mexican  law. 
No  foreign  companies  are  authorized  to  do  banking  business  per- 
taining to  chartered  banks. 

(3)  Legislative  regulations  for  the  management  of  the  banks  ^ 
sound  economic  principles  are  thereby  enforced,  not  only  morally 
and  scientifically,  but  legally  as  well. 

(610) 


Banking  til  Mexico  33 

(4)  Supervision  by  the  stale,  the  principal  characteristics  of 
which  are  the  obligation  of  rendering  certain  statements  intended 
for  publication,  and  the  submission  to  the  intervention  of  the  Sec- 
retary of  the  Treasury,  acting  as  Comptroller  of  the  Currency,  by 
means  of  special  delegates. 

(5)  The  above  regulations  refer  only  to  chartered  banks,  which 
are : 

(a)  Banks  of  issue,  especially  authorized  to  issue  bank  notes. 
No  other  banks,  nor  institutions,  companies. or  individuals  can  make 
issues  of  this  kind. 

(b)  Mortgage  banks,  the  special  feature  of  which  is  the  issuing 
of  mortgage  bonds. 

(c)  Promotion  banks,  authorized  to  issue  cash  bonds. 

Deposit  banks,  savings  banks,  trust  companies  and  other  bank- 
ing institutions  can  be  freely  established  without  requiring  any 
charter  or  previous  authorization,  be  they  Mexican  or  foreign.  Fol- 
lowing are  the  limitations  concerning  the  institutions  just  referred 
to: 

(i)  They  cannot  issue  banknotes  nor  establish  in  the  country 
any  branch  or  office  for  the  redemption  of  notes  issued  abroad. 

(2)  They  cannot  use  the  word  "bank"  in  designating  tliem- 
selves,  except  in  the  case  of  foreign  banks,  provided  they  are  pre- 
viously authorized  by  the  Treasury  Department. 

(3)  They  are  not  subject  to  any  special  supervision  from  the 
government. 

(4)  They  do  not  enjoy  the  reductions  in  taxation  granted  to 
the  chartered  banks. 

Later  on,  a  law  was  enacted,  regulating  the  bonded  warehouses, 
which  are  practically  assimilated  to  credit  institutions. 

Under  the  law  of  1897  about  thirty-four  banking  institutions 
have  been  established,  to  wit:  twenty-live  banks  of  issue,  three  mort- 
gage banks  and  six  promotion  banks. 

We  will  now  proceed  to  survey  the  field  of  operations  of  said 
banks  as  regards  the  most  salient  features. 

Issue  banks  are  authorized  to  issue  bank  notes,  to  accept  de- 
posits at  sight  and  on  term,  and  to  make  the  investment  of  their 
capital  and  other  funds  in  public  securities  and  short-time  loans. 

As  for  notes,  the  issue  may  never  exceed  three  times  the  face 

(611) 


34  The  Annals  of  tlic  American  Academy 

value  of  the  bank's  stock,  nor  be  superior  to  twice  the  amount  of 
cash,  less  the  total  amount  of  the  deposits  payable  at  call. 

Let  us  see  how  the  Mexican  issue  banks  have  obeyed  the  legal 
rulLng  and,  thereby,  ascertain  what  is  the  guarantee  in  specie  for 
their  outstanding  notes. 

According  to  the  official  statements  concerning  issue  banks, 
their  cash  holdings  amounted  in  June  30,  1910,  to  89,059,802.45 
pesos  (a  peso  being  practically  equal  to  fifty  cents,  American  gold). 
This  sum  was  represented  by  the  following  various  species  of  cur- 
rency : 

Gold,  coined  Pesos  53,690,870.00 

Silver  pesos   27,625,377.00 

Fractional  currency   5,705,834.83 

Gold,  bullion    2,037,720.62 

Total  amount  of  cash  holdings 89,059,802.45 

As  has  been  seen,  in  the  above  total  the  amount  of  gold  coined 
and  in  bullion  represents  about  five-eights,  and  silver  about  three- 
eights.  These  figures  are  very  interesting  as,  besides  showing  be- 
yond a  doubt  the  soundness  of  the  guarantee  which  stands  behind 
the  banknotes,  they  afiford  the  assurance  that  the  latter  can  be  re- 
deemed in  gold,  and  this  assurance  is  one  of  the  strongest  founda- 
tions for  the  stability  of  exchange. 

Banks  are  permitted  to  put  in  circulation  notes  for  twice  the 
value  of  their  cash  holdings.  Using  the  above  figures  we  would 
have: 

Twice  the  amount  of  cash  holdings Pesos  178,119,604.90 

Less  the  amount  of  deposits  on  demand 67,826,271.91 

Authorized  circulation 110,293,332.99 

Now,  the  notes  outstanding  on  said  date  (June  30th)  amounted 
to  pesos  112,160,663.00,  this  sum  being  about  two  millions  greater 
than  the  authorized  circulation.  The  reason  of  this  difference  is 
that  the  National  Bank  and  the  Nuevo  Leon  Bank,  as  we  have  said 
before,  are  not  exactly  subject  to  the  prescriptions  of  the  law  and 
can  issue  notes  for  three  times  their  cash  holdings.  Besides,  the 
National  and  the  London  Bank  are  not  obliged  by  their  charters  to 
hold  a  special  reserve  against  their  call  deposits,  and  they  only  have 

(612) 


Banking  in  Mexico  35 

the  reserve  suggested  by  their  own  prudence,  which  is  not  always 
exactly  fifty  per  cent  of  the  deposits.  Nevertheless,  the  metallic 
guarantee  of  our  banks  of  issue  is  a  very  strong  one. 

For  a  full  understanding  of  our  system  w^e  must  remark : 
(i)   Our  system  is  that  of  "banking  on  assets,"  founded  upon 
the  "banking  principle,"  being  thus  a  very  elastic  one. 

(2)  This  elasticity  is  increased  by  the  fact  that  our  notes  are 
guaranteed  by  reserve  funds  in  cash.  It  will  be  easy  to  see  that  we 
have  not  confused  banking  credit  with  public  credit,  and  should  a 
crisis  occur  in  either,  it  does  not  follow  that  the  other  would  of 
necessity  experience  a  contraction. 

(3)  IMetallic  reserves  are  required,  not  only  for  the  protection 
of  the  banknotes,  but  for  that  of  the  call  deposits  as  well,  as  the 
danger  for  the  public  is  the  same,  and  perhaps  greater  in  the  case 
of  the  latter  than  in  that  of  the  former. 

Under  these  wise  principles  business  has  grown,  as  can  be 
seen  from  the  following  comparative  statement  of  circulation : 

Year  Banknotes  outstanding.  Cash  holdings. 

1897  38,497,367.00 43,350,648.75 

1898  46,471,650.75 34,819,723-93 

1899  56,247,355.25 39,808,883.43 

1900  62,657,714.50 53,107,694.67 

1901  62,392,413.25 49,992,37375 

1902  72,890,235.50 53,147,288.30 

1903   88,264,218.50 5T, 260,539.13 

1904  83,540,440.00 56,245,838.69 

1905  82,995,576.50 79,087,706.10 

1906  93,597,868.50 63,695,882.24 

1907  98,184,395.25 63,989,663.85 

1908  89,659,571.00 64,910,541.18 

1909  92,221,477.00 84,352,541.92 

1910  1 12,160,663.00 89,059,802.45 

The  law  does  not  consider  the  redemption  of  notes  and  the 
payment  of  deposits  sufficiently  assured  by  the  possession  only  of 
cash  reserves,  and  prescribes  that  the  funds  of  the  banks  shall  be 
invested  in  such  a  manner  as  to  enable  them  to  turn  their  invest- 
ments into  ready  money  at  any  time  it  becomes  necessary.  As  we 
cannot  go  very  deeply  into  this  matter,  we  shall  confine  our  exami- 
nation to  the  principal  regulations  enacted  with  a  view  to  reducing 
to  a  minimum  the  danger  of  defalcation. 

(613) 


36  Tlic  Annals  of  the  American  Academy 

It  is  forbidden  to  our  banks  of  issue: 

(i)  To  lend  money  upon  a  mortgage,  except  when  the  credit 
of  the  signers  of  obhgalions  held  by  the  bank  is  impaired,  or  when 
the  Treasury  Department  gives  its  express  consent. 

(2)  To  make  loans  or  to  discount  or  negotiate  notes  or  other 
paper  running  for  more  than  six  months. 

(3)  To  discount  notes  or  other  commercial  paper  not  guaran- 
teed by  at  least  two  signatures  of  acknowledged  solvency  or  by 
collateral  security. 

(4)  To  accept  uncovered  bills  of  exchange  or  drafts  and  to 
open  credit  accounts  that  cannot  be  closed  at  the  bank's  pleasure. 

(5)  To  allow  any  single  person  or  corporation  to  become  in- 
debted to  them,  either  directly,  indirectly  or  jointly,  for  amounts 
which,  in  the  aggregate,  exceed  ten  per  cent  of  the  paid-up  capital 
of  the  bank. 

(6)  To  acquire  real  estate,  except  such  as  is  necessary  for  the 
carrying  on  of  the  business  of  the  bank,  etc. 

These  regulations  have  the  very  important  effect  of  allowing 
banks  to  be  provided  with  specie  when  needed  to  meet  their  obli- 
gations to  the  public.  In  case. of  a  run  on  the  bank  or  of  a  contrac- 
tion of  business,  the  nature  of  the  assets  will  allow  them  to  redis- 
count their  bills,  securities,  etc.,  and  thus  to  face  the  difficulty.  We 
must  say  that  in  the  history  of  Mexican  banks  of  issue,  and  under 
the  law  of  1897,  there  has  never  been  a  run  on  any  bank,  and  up  to 
this  writing,  the  circulation  of  banknotes  has  always  been  facilitated, 
in  spite  of  their  not  being  legal  tender,  by  the  high  confidence  be- 
stowed upon  them  by  the  public ;  their  redemption  has  invariably 
been  effected  without  the  least  delay  or  difficulty,  even  in  cases  in 
which  the  public  might  have  been  distrustful.  Our  monetary  sys- 
tem, which  practically  excludes  the  exportation  of  coined  gold  in  the 
case  of  an  adverse  commercial  balance,  is  not  without  influence  in 
these  facts. 

As  far  as  the  true  constitution  of  the  assets  can  be  known,  it 
may  be  stated  that  the  total  of  the  reserve  funds  in  cash,  and  of  the 
assets  readily  realizable,  exceeds  the  liabilities  involving  a  public 
interest.    The  following  figures  will  prove  the  last  assertion : 

Assets. 

Cash Pesos  89,059,802.45 

(614) 


Banking  in  Mexico  37 

Loans,  securities  and  bills  readily  realizable: 

First  class  securities  55.832,029.59 

Discounted  bills   U,^5,9^3-07 

Loans 71,191,026.89 

Loans  on  collateral  securities,  bonds,  etc 41,245,500.02 

Loans  in  current  account  90i385.9i4-89 

361,580,186.91 

Liabilities. 

(Only  those  involving  a  public  interest.) 

Deposits  on  call  Pesos    67,826,271.91 

Deposits  at  term  58,026,027.36 

Banknotes    outstanding    112,160,663.00 

Sundry  creditors   45,971,688.52 

283,984,650.79 

The  comparison  between  these  two  totals  is  evidence  of  the 
sound  condition  of  the  Mexican  banks  of  issue. 

The  stock  of  these  banks  amounts  to  pesos  118,800,000.00  and 
their  reserve  funds,  comprising  those  created  by  law  and  those 
created  by  the  foresight  of  the  banks  amount  to  pesos  52,567,536.08. 

Mortgage  banks  have  not  developed  in  the  same  manner  as 
issue  banks.  We  have  but  two  institutions  of  this  kind,  and  a  third 
one  will  be  established  very  soon.  The  first  two  do  their  busi- 
ness in  the  city  of  Mexico,  and  through  branches,  in  all  the  country ; 
the  third  will  carry  on  banking  in  the  State  of  Sonora. 

The  principal  business  of  mortgage  banks  is  the  issue  of  bonds 
running  for  a  long  time,  redeemable  out  of  a  special  sinking  fund 
twice  a  year,  under  the  system  of  annuities  and  bearing  interest 
payable  semi-annually.  The  proceeds  of  the  sale  of  these  bonds 
must  be  devoted  to  the  making  of  mortgage  loans. 

Special  regulations  are  contained  in  the  law,  for  the  purpose  of 
giving  all  security  to  the  redemption  of  the  bonds.  Thus,  the  total 
amount  of  the  bonds  may  never  exceed  the  total  of  mortgage  loans ; 
the  latter  to  be  made  under  strictly  fixed  conditions  in  order  to 
afford  at  any  time  a  sound  guarantee  to  the  bondholders. 

Banks  of  this  kind  do  not  enjoy  any  practical  monopoly,  neither 
in  the  nature  of  their  investments  (everybody  being  entitled  to  lend 

(615) 


a^;i45 


38  The  Annals  of  the  .Unericaii  ^Icademj 

money  on  mortgage)  nor  in  the  issuing  of  bonds,  as  all  the  limited 
companies,  and  specially  the  railroad  companies,  arc  authorized  to 
issue  mortgage  bonds. 

Such  securities,  as  far  as  our  banks  are  concerned,  have  proved 
to  be  an  excellent  investment  for  foreign  capitalists,  as  the  greatest 
part  of  the  issues  are  owned  by  them. 

The  issue  of  bonds  amounted  on  June  30,  1910,  to  pesos  44,904,- 
600.00  and  have  increased  since  then.  The  mortgage  loans  totaled 
pesos  46,872,918.47. 

The  prospect  of  these  banks  is  a  very  bright  one,  as  they  can 
issue  bonds  for  twenty  times  their  paid  up  capital :  as  this  amounts 
to  pesos  10,000,000.00,  they  can  carry  their  business  to  pesos  200,- 
000,000.00  even  without  any  increase  of  their  stock. 

We  give  the  name  of  promotion  banks  to  certain  institutions 
specially  intended  by  the  law  to  impart  their  help  to  agriculture, 
mining  and  manufacturing,  by  means  of  loans  guaranteed  according 
to  a  peculiar  system  which  partakes  of  the  mortgage  and  the  pledge. 

Promotion  banks  are  authorized  to  issue  cash  bonds  running 
from  six  months  to  three  years ;  these  bonds  w-ere  created  to  afford 
opportunities  for  the  investment  of  savings  not  yet  intended  for  a 
definitive  destination. 

Unfortunately  this  kind  of  bank  has  not  made  great  progress, 
perhaps  owing  to  the  influence  of  traditional  causes  closely  linked 
to  the  solution  of  the  very  difficult  question  of  agrarian  credit. 

The  issue  of  bonds  has  only  been  made  by  one  of  these  banks 
and  in  such  a  small  amount  that  it  is  not  worth  while  to  mention 
it.  The  loans  to  cultivators  or  miners  are  practically  of  small  im- 
portance. Two  of  these  banks  are  in  an  unsatisfactory  condition, 
doing  but  little  business  with  correspondingly  small  profits.  The 
other  four,  though  in  a  thriving  condition,  are  not  properly  promo- 
tion banks,  as  they  do  not  carry  on  to  a  full  extent  the  special  busi- 
ness of  this  kind  of  institution;  they  are,  rather,  banking  houses, 
doing  a  deposit,  loan  and  exchange  business,  and  financing  other 
enterprises. 

The  most  important  promotion  bank  is  the  Mexican  Central 
Bank,  the  individuality  of  which  in  our  banking  world  will  be  set 
forth  in  the  next  and  final  chapter  of  this  paper. 

To  bring  this  matter  to  an  end  we  will  state  that  the  aggregate 

(616) 


Banking  in  Mexico  39 

of  the  promotion  banks'  stock  amounts  to  pesos  47,800,000.00,  their 
cash  bonds  to  pesos  4,893,200.00;  their  loans  for  agricuUural  pur- 
poses to  pesos  2,174,794.29,  and  their  deposits  to  pesos  26,379,872.39. 

The  National  Bank  of  Mexico — a  bank  of  issue — and  the  Mex- 
ican Central  Bank — a  promotion  bank — have  a  place  of  their  own  in 
our  banking  system. 

The  former  is,  for  its  capital,  the  importance  of  its  notes  out- 
standing and  the  bulk  of  its  business,  our  principal  banking  institu- 
tion. It  has  branches  and  agencies  in  all  the  capitals  of  the  differ- 
ent states  of  the  republic  and  covers  the  whole  territory  with  its 
operations.  Historically,  it  is  the  pioneer  bank  in  Mexico  and  has 
educated  all  the  country  to  the  use  of  credit.  Its  relations  with 
the  government  are  of  a  very  intimate  character.  It  is  entrusted 
with  the  payment  of  the  different  debts  of  the  nation ;  it  acts  as  a 
depository  of  the  public  funds ;  it  concentrates  the  proceeds  from 
the  custom  houses  and  other  fiscal  offices.  Besides,  it  is  a  great  re- 
discount bank  which  takes  over  the  paper  of  the  other  banks  when 
they  are  in  need  of  money  to  meet  their  obligations. 

The  Mexican  Central  Bank  is  the  most  important  of  the  pro- 
motion banks ;  but  occupies  a  special  position  like  a  hyphen  between 
all  the  issue  banks  established  outside  of  the  city  of  Mexico.  It 
concentrates  the  notes  of  these  banks  and  performs  the  services  of 
a  clearing  house  for  them  by  exchanging  their  notes  in  the  federal 
capital ;  it  is  verily  a  central  bank  as  it  acts  as  a  regulator  of  all  the 
issue  banks  of  the  different  states  of  the  republic.  It  has,  besides, 
obligated  itself  to  support  in  different  ways  the  before  mentioned 
banks  in  case  of  difficulty.  In  short,  the  Mexican  Central  Bank  is, 
in  many  of  its  features,  a  result  of  the  co-operation  between  the  issue 
banks. 

Such  is  the  Mexican  banking  system,  which  may  be  concisely 
defined  by  saying  that  it  is  a  plural  system  of  privileged  institutions 
under  government  inspection,  whose  business  is  regulated  by  the 
operation  of  two  greater  banks. 


(617) 


THE  WAY  TO  ATTAIN  AND  MAINTAIN  MONETARY 
REFORM  IN  LATIN-AMERICA 


By  Charles  A.  Con  ant. 
Former  Commissioner  on  tlie  Coinage  of  the  Philippine  Islands,  New  York. 


For  many  years  the  names  of  certain  countries  of  Latin- 
America  were  synonymous  in  the  pubhc  mind  with  paper  inflation 
and  dubious  finances.  This  stigma  the  more  progressive  countries 
have  in  recent  years  been  rapidly  casting  off.  They  have  in  some 
cases,  where  they  had  been  saddled  with  debt  without  receiving  an 
adequate  return,  made  equitable  readjustments,  as  in  the  cases  of 
Santo  Domingo,  Honduras,  and  Costa  Rica.  They  have  in  other 
cases  raised  their  credit  to  the  point  where  their  securities  sell  nearly 
on  a  parity  with  those  of  leading  European  countries,  as  in  the 
cases  of  Brazil  and  the  Argentine  Republic. 

The  reform  of  the  fiscal  affairs  of  a  government  which  has 
been  in  difficulties  is  perhaps  a  wise  preliminary  to  reform  in  the 
monetary  system ;  but  in  a  sense  the  monetary  reform  transcends 
in  importance  the  fiscal  reform.  Fiscal  reform  means  the  restoration 
of  a  favorable  balance  to  the  Inidget  and  the  prompt  payment  of 
interest  on  public  obligations.  Monetary  reform  reaches  deeper 
into  the  heart  of  commercial  affairs,  because  it  alone  makes  possible 
the  free  interchange  of  products  and  the  investment  of  foreign 
capital  upon  a  basis  which  ensures  its  permanency  in  gold  value. 

Capital  shrinks  from  a  country  without  a  monetary  standard 
based  upon  gold,  because  both  the  principal  and  the  dividends  to  be 
remitted  to  gold  countries  may  shrink  radically  in  gold  value  with 
the  depreciation  of  the  local  currency.  On  the  other  hand,  a  coun- 
try whose  currency  system  is  based  upon  the  gold  standard  is  able 
not  only  to  attract  capital  for  permanent  investment,  but  also  its 
share  of  the  great  circulating  loan  fund  which  is  available  for  equal- 
izing rates  for  money  and  meeting  unexpected  demands  by  its  free 
movement  between  the  financial  centers.  It  was  pointed  out  in  the 
report  of  the  Commission  on  International  Exchange,  when  Mexico 
was  still  on  the  silver  basis,  that  Mexican  bankers  had  sufficient 
credit  to  borrow  money  in  Paris,  Berlin  or  Brussels  in  large  amounts 

(6i8) 


Maintenance  of  Monetary  Reform  in  Latin-America         41 

and  make  seven,  eight,  or  ten  per  cent  on  the  investment,  but  did 
not  dare  to  do  so,  because  if  it  was  loaned  on  short-time  and  they 
were  called  on  to  repay  it,  the  fluctuations  in  the  gold  value  of  the 
silver  currency  might  more  than  wipe  out  all  their  profit.^ 

The  importance  of  offering  inducements  for  the  inflow  of  for- 
eign capital  has  evidently  been  obtaining  recognition  in  recent  years 
in  Latin-America  and  is  bringing  about  measures  to  restore  the  cur- 
rency to  a  gold  basis  in  those  countries  which  have  been  increasing 
their  production  of  goods  for  export  and  thereby  strengthening  their 
credit  position  abroad.  Steps  towards  monetary  reform  have  been 
taken  within  the  past  fifteen  years  by  the  Argentine  Republic,  Brazil, 
Peru,  Ecuador,  Bolivia,  and  other  countries. 

It  will  not  be  disputed  that,  in  the  effort  to  return  to  a  sound 
monetary  system  in  any  of  these  countries,  it  is  of  the  highest  impor- 
tance that  the  method  chosen  should  be,  if  possible,  the  most  economi- 
cal, the  most  certain  to  maintain  permanently  the  gold  standard,  and 
the  most  likely  to  afford  a  supply  of  currency  adequate  for  local 
needs.  The  question  naturally  presents  itself  whether  the  methods 
which  are  being  pursued  or  considered  are  the  best  for  the  accom- 
plishment of  these  purposes.  If  they  are  not,  why  not?  And,  also, 
if  there  are  better  methods,  what  are  those  methods? 

The  science  of  maintaining  an  adequate  stock  of  currency  upon 
principles  at  once  economical  and  safe  has  been  until  recently  in  its 
infancy.  It  was  enough  for  early  economists  of  the  school  of  Ri- 
cardo,  that  a  currency  consisting  of  gold  coin  ensured  the  full 
intrinsic  value  of  the  national  circulation,  and  afforded  the  means 
of  maintaining  stable  exchange.  Much  has  been  learned  in  currency 
matters  within  the  last  few  decades,  especially  in  regard  to  the 
regulation  of  foreign  exchange.  Most  of  the  monetary  systems 
created  since  1890  have  depended  in  some  degree,  as  in  the  case  of 
British  India,  the  Philippines,  INTexico,  Russia,  and  Austria-Hungary, 
upon  the  control  of  the  market  for  exchange.  In  this  field  expe- 
rience has  developed  what  is  substantially  a  new  monetary  system, 
known  as  the  gold  exchange  standard. 

What  is  this  gold  exchange  standard,  which  was  adopted  by  the 
Congress  of  the  United  States  for  the  Philippine  Islands  and  was 
made  the  foundation  of  Finance  Minister  Limantonr's  reform  of  the 
monetary  system  in  Mexico?    It  may  be  briefly  defined  thus: 

'See  the  author's  "Principles  of  Money  and  Banking,"  Vol.  I,  p.  353. 

(6t9) 


42  The  Annals  of  the  American  Academy 

The  maintenance  of  silver  coins  at  parity  with  gold,  without 
reference  to  their  bullion  value,  by  restriction  of  the  quantity  to  the 
requirements  of  local  trade  and  by  the  sale  of  bills  of  exchange  on 
exchange  funds  deposited  abroad,  at  legal  gold  parity,  plus  such 
legitimate  charges  for  exchange  as  prevail  between  gold  countries. 

Wherein, does  this  system  differ  from  the  simple  gold  standard? 
And  wherein  is  it  more  suitable  for  the  undeveloped  countries? 

The  difference  between  the  exchange  standard  and  the  simple 
gold  standard  is  the  extension  of  the  banking  principle  to  the  foreign 
exchanges.  Under  the  exchange  system  the  gold  which  is  needed 
for  settling  foreign  balances  is  kept  in  foreign  financial  centers 
instead  of  at  home  and  a  "gold  export"  or  "gold  import"  movement 
is  accomplished  by  the  transfer  of  drafts  instead  of  boxing  up  and 
shipping  physical  gold.  From  this  system  flow  important  economic 
advantages,  beyond  the  mere  economy  in  freight  and  express  charges, 
which  can  perhaps  be  better  brought  out  by  a  study  of  recent  mone- 
tary history  than  by  stating  them  in  abstract  form. 

Among  the  South  American  countries  which  have  taken  steps 
towards  the  restoration  of  stability  to  their  monetary  systems  within 
the  past  dozen  years,  have  been  Brazil  and  the  Argentine  Republic. 
These  countries  have  been  especially  fortunate  in  the  volume  and 
value  of  the  exports  of  their  principal  products, — coffee,  sugar,  wheat 
and  hides.  This  has  enabled  them  to  draw  gold  in  large  amounts 
from  Europe  and  North  America.  Under  the  monetary  system 
which  has  prevailed  for  several  years  in  these  two  countries,  the 
gold  has  been  accepted  by  the  conversion  funds  in  exchange  for 
paper  at  a  fixed  rate  of  exchange.  Up  to  a  very  recent  date,  gold 
has  not  been  freely  paid  by  the  conversion  offices  for  the  redemp- 
tion of  paper.  The  value  of  the  paper  has  been  maintained  by  the 
fact  that  the  accretions  to  existing  issues  have  been  covered  fully  by 
gold,  and  the  need  for  this  additional  currency  has  been  indicated 
by  the  willingness  to  buy  it  with  gold. 

From  this  standpoint,  of  the  demand  for  currency,  it  might  be 
said  that  even  the  paper  which  was  not  covered  by  gold,  issued 
prior  to  the  creation  of  the  conversion  funds,  also  represented  just 
the  amount  of  currency  wdiich  the  country  was  then  able  to  employ 
in  its  exchanges,  when  taken  at  the  gold  value  to  which  it  had  been 
reduced  in  use.  In  the  case  of  over-issues  of  irredeemable  paper, 
there  is  usually  a  tendency,  others  things  being  equal,  for  the  gold 

(620) 


Maintenance  of  Monetary  Reform  in  Latin-America         43 

value  of  the  paper  to  fall  in  the  ratio  of  its  excess  above  the  amount 
of  t^old  currency  required  for  doing  business.- 

Among  the  factors  which  cause  a  variation  from  this  ratio  are 
the  degree  of  credit  in  which  the  paper  is  held  from  time  to  time, 
the  fluctuations  caused  by  the  demands  for  foreign  exchange,  and 
the  possibility  of  ultimate  redemption  at  any  given  rate.  In  the 
case  of  the  Argentine  Republic,  the  value  of  44  gold  centavos  for 
100  paper  centavos,  which  was  adopted  as  the  gold  value  of  new 
paper  to  be  issued  by  the  conversion  office,  was  about  the  value  of 
the  paper  at  the  time  when  the  fund  was  established,  and  may,  ac- 
cording to  the  above  rule,  be  considered  as  representing,  at  its  gold 
value,  the  amount  of  currency  then  demanded  by  the  business  of  the 
country. 

Now  that  gold  is  to  be  paid  in  these  countries  for  paper,  ap- 
parently without  premium  or  other  restraint  upon  its  issue,  it  be- 
comes an  interesting  problem  whether  difficulties  will  arise  in  keeping 
gold  in  the  country.  The  merit  of  the  system  of  a  pure  gold  cur- 
rency is  that  it  leaves  unhampered  to  the  conflict  of  individual  initi- 
ative throughout  the  world  the  movement  of  gold  and  credit.  The 
tendency  of  such  a  system  is  to  send  gold  to  those  communities 
which,  by  reason  of  their  wealth,  have  the  largest  surplus  available 
for  investment  in  a  metallic  currency  and  have  the  most  frequent 
use  for  gold.  Unfortunately  for  the  countries  of  less  financial  power, 
the  tendency  of  this  free  play  of  economic  forces  is  to  draw  gold 
away  from  them  to  those  countries  which  are  economically  stronger. 
This  fact  has  been  demonstrated  repeatedly  in  monetary  experience 
and  has  extended  to  the  further  application,  that  any  currency, 
whether  of  coin  or  paper,  issued  by  a  governing  country,  when  put 
in  circulation  in  a  dependency,  tends  to  return  to  the  mother  country 
and  denude  the  dependency  of  an  adequate  supply  of  monetary  signs. 

The  operation  of  this  principle,  of  the  drainage  of  gold,  has  been 
witnessed  not  only  in  the  case  of  countries  essentially  poor,  but  even 
in  those  of  large  resources  where  a  country  of  stronger  resources 
has  possessed  the  same  monetary  system.  This  has  been  the  history 
of  the  Latin  IMonetary  Union,  where  the  coins  of  each  country  have 

''Thus  in  Brazil,  the  297,800,000  milreis  in  papor  in  circulation  in  1800  was 
worth  more  in  gold  than  the  788,364,000  milreis  which  had  been  forced  into  circu- 
lation in  1808.  Vide  the  present  writer's  "History  of  Modern  Banks  of  Issue," 
Fourth  Edition,  p.  501. 

(621) 


44  ^^'^  Annals  of  the  American  Academy 

common  currency  in  the  others.  This  has  faciHtated  such  a  steady 
drainage,  first  of  gold  and  uUiniately  of  silver,  from  Belgium  and 
Switzerland  into  France,  that  it  has  been  repeatedly  urged  by  re- 
sponsible economists  that  Belgium  and  Switzerland  should  withdraw 
from  the  Latin  Union  and  establish  each  for  herself  a  currency 
which  should  be  to  some  degree  under  her  own  control  and  not  sub- 
ject to  free  exportation  by  individuals  for  an  insignificant  profit  and 
independent  of  the  legitimate  demands  for  exchange.  In  the  case 
of  Brazil  and  the  Argentine  Republic,  one  of  the  factors  which  has 
drained  Belgium  and  Switzerland  of  their  gcd  will  be  lacking, — uni- 
formity of  the  currency  with  that  which  circulates  in  other  countries. 
The  Argentine  Republic  acted  wisely,  from  this  point  of  view,  in  re- 
jecting the  proposal  to  adopt  a  unit  of  the  same  value  as  the  franc, 
which  might  have  led  to  the  draining  away  of  her  gold  coins  to 
France  and  other  countries  of  the  Latin  Union. 

The  reason  for  the  disappearance  of  gold  from  countries  which 
are  not  the  centers  of  exchanges  is  found  in  the  principle  of  economic 
selection,  otherwise  described  as  the  law  of  marginal  utility.  To  the 
individual  desiring  foreign  products,  gold  in  his  hands  is  the  most 
convenient  means  of  obtaining  them.  He  parts  with  gold  because 
his  need  for  it  is  less  intensive  than  for  the  goods,  but  in  so  doing  he 
deprives  the  community  of  metallic  currency.  So  long  as  the  control 
of  the  supply  of  metallic  currency,  therefore,  is  left  in  such  com- 
munities to  the  play  of  individual  initiative,  gold  tends  to  disappear. 

It  is  at  this  point  that  the  advantages  of  the  exchange  standard 
reveal  themselves.  The  government  has  the  same  interest  and 
economic  sanction  for  taking  measures  to  maintain  a  local  currency, 
adequate  to  the  needs  of  the  country,  which  it  has  for  doing  other 
things,  like  the  provision  of  water  supply  and  sewerage,  which  are 
not  sufficiently  the  interest  of  a  single  individual  to  insure  their 
being  done  by  him,  but  which  are  of  essential  value  to  the  com- 
munity as  a  whole.  Upon  the  individual  trader  there  is  no  respon- 
sibility, except  his  own  convenience,  to  contribute  a  share  of  his 
capital  sufficient  to  afford  an  adequate  circulating  medium  for  the 
country ;  but  the  government,  viewing  broadly  the  need  for  such  a 
medium  for  the  promotion  of  mercantile  exchanges  and  the  develop- 
ment of  the  natural  resources  of  the  country,  may  justly  decide  to 
devote  a  certain  portion  of  the  national  capital  to  the  maintenance  of 
a  sound  and  suitable  currency. 

(622) 


Maintenance  of  Monetary  Reform  in  Latin-America         45 

In  the  ideal  financial  world,  gold  should  be  permitted  to  move 
freely  from  one  country  to  the  other  with  the  smallest  possible  ob- 
stacles except  those  set  up  by  changes  in  the  rate  of  discount.  It 
has  come  to  be  recognized,  however,  in  recent  years,  as  the  result 
of  the  experience  of  British  India,  Chile  and  other  countries,  that  the 
obstacles  of  a  variation  in  monetary  units  and  in  legal  tender  laws, 
and  restraints  upon  the  free  delivery  of  gold  for  export  may  con- 
tribute their  share  in  checking  the  adverse  current  of  the  foreign  ex- 
changes, without  violating  sound  economic  principles.  The  protec- 
tion afforded  by  the  exchange  standard  to  the  monetary  system  is 
indeed  only  a  variation  and  extension  of  those  methods  of  foresight, 
management  of  the  discount  rate,  and  accumulation  of  foreign  bills 
which  are  now  recognized  everywhere  as  the  legitimate  weapons  of 
the  central  bank  of  issue,  charged  by  law  or  financial  public  opinion 
with  the  function  of  safeguarding  the  national  credit. 

The  principles  of  the  gold  exchange  standard  have  been  in 
operation  in  British  India  since  about  1899 '  ""^  Peru  since  1901  ;  in 
the  Philippine  Islands  since  1903;  in  Panama  since  1904;  and  in 
Mexico  since  1905.  Such  dangers  as  were  feared  at  first  in  its 
operation  have  been  met  and  overcome  or  have  been  proved  to  be 
mythical.  The  supreme  test  of  the  system  took  place  in  British  India 
as  the  result  of  the  crop  failures  of  the  spring  of  1908,  which  de- 
prived the  country  to  a  large  degree  of  the  means  of  meeting  its 
foreign  obligations  by  the  sale  of  bills  against  the  exportation  of  its 
products.  The  result  of  this  test  was  that  the  reserve  fund  of  about 
$90,000,000  held  in  London  for  the  protection  of  $600,000,000  in 
Indian  currency  was  reduced  about  one-half  by  the  sale  of  drafts  in 
India  upon  this  fund.  The  silver  coins  paid  for  these  drafts  were 
locked  up  in  the  Indian  Treasury  until  the  time  came  for  the  revival 
of  Indian  agriculture  and  trade  and  the  demand  for  an  increase  in 
the  circulation.  This  demand  w^as  met  by  renewed  sales  in  London 
of  drafts  on  the  Indian  Treasury,  which  drafts  were  paid  off  in  India 
in  the  local  currency,  which  was  thus  restored  to  active  local  use. 

The  principle  of  the  gold  exchange  standard  is  the  same  which 
has  governed  banking  operations  during  the  past  century, — the  ex- 
istence of  an  adequate  reserve  in  gold  or  gold  credits  to  maintain 
a  credit  circulation.  One  of  the  important  questions  which  was 
put  to  the  test  in  this  experiment  in  British  India  was  how  far  an 
adverse  balance  of  foreign  trade  or  other  unfavorable  circumstances 

(623) 


46  The  Annals  of  the  American  Academy 

may  reasonably  be  expected  to  go  in  their  demands  upon  the  ex- 
change fund.  The  mathematical  answer  in  this  case  was  the  ratio 
of  $50,000,000  to  $600,000,000,  or  about  eight  per  cent.  Obviously  a 
country  will  not  part  with  all  its  currency  in  order  to  meet  obliga- 
tions abroad,  even  if  there  are  no  obstacles  in  exchange  rates  to  check 
the  free  flow  of  coin ;  and  much  less  is  it  likely  to  do  so  if  such  ob- 
stacles exist.  The  suggestion  that  demands  upon  the  exchange  funds 
could  reach  such  a  limit,  or  the  half  of  it,  is  parallel  with  that  of 
the  novice,  without  knowledge  of  banking  history,  who  enquires  what 
would  happen  to  a  bank  if  all  its  depositors  should  demand  currency 
for  their  deposits  on  the  same  day.  Experience  rather  than  abstract 
possibilities  has  determined  the  attitude  of  the  financial  world 
towards  these  questions.  In  the  case  of  a  token  currency  of  silver, 
however,  dififused  over  an  entire  community,  the  position  is  much 
stronger  than  in  the  case  of  a  single  bank,  with  a  circulation  largely 
local  and  subject  to  the  possibilities  of  sudden  distrust.  It  is  not 
merely  that  the  national  currency  commands  greater  confidence,  but 
that  it  constitutes  the  sole  medium  of  exchange.  Even  if  depreciated, 
experience  has  shown  that  a  currency  will  continue  to  be  employed 
for  the  necessary  transactions  of  daily  life,  while  in  the  case  of  a 
single  bank  it  might  be  conceivable  that  all  its  circulating  notes  could 
be  withdrawn  from  circulation  without  impairing  to  any  noticeable 
degree  the  means  of  exchange  in  other  forms  of  currency  at  the  com- 
mand of  the  community. 

Thus  there  has  been  evolved  the  principle  that  the  demands  upon 
an  exchange  fund  arising  from  the  transfer  of  capital,  adverse  ex- 
changes, or  even  distrust,  are  limited  to  a  small  proportion  of  the 
total  volume  of  the  currency  of  the  country.  The  experience  of 
British  India  in  1908,  when  the  contraction  which  was  expressed  in 
the  demand  for  exchange  on  London  amounted  to  about  eight  per 
cent  of  the  estimated  total  circulation  of  the  country,  may  not  be  the 
ultimate  limit  of  possible  demands  upon  a  reserve  fund  in  case  of 
financial  calamity, — indeed  there  is  no  means  of  fixing  an  arbitrary 
limit.  That  test  was  a  very  severe  one.  however,  and  took  place  in 
a  country  where  the  token  coinage  had  been  accumulating  for  gen- 
erations to  an  amount  which  could  not  even  be  accurately  ascer- 
tained. In  any  such  test  in  a  country  which  deliberately  adopts  the 
exchange  standard  hereafter,  a  reserve  will  be  created  in  advance 
adequate  to  meet  probable  demands  as  determined  by  statistics  ap- 

(624) 


Maintenance  of  Monetary  Reform  in  Latin-America         47 

proximately  accurate  of  the  amount  of  coins  issued,  the  amount 
exported  or  consumed  in  the  arts,  and  the  amount  actually  in  banks 
or  in  circulation  at  an)'  given  moment.  The  statistical  problem  will 
be  comparatively  simple,  except  in  the  case  of  ignorant  hoarding  of 
the  coins,  because  the  difference  between  their  face  value  and  their 
bullion  value  will  prevent  any  considerable  consumption  in  the  arts  or 
exportation  as  bullion.  If  hoarding  occurs  in  spite  of  the  credit 
element  in  the  value  of  the  coins,  it  will  only  reduce  by  its  gross 
amount  the  net  circulation  to  be  protected  by  the  gold  exchange 
fund. 

No  burden  of  permanent  indebtedness  or  of  annual  interest 
payments  is  required  for  launching  and  maintaining  the  gold  ex- 
change standard.  If  conducted  purely  as  a  government  operation, 
as  was  the  case  in  the  Philippine  Islands,  a  temporary  advance  of 
funds  is  necessary  for  purchasing  and  carrying  the  silver  bullion 
until  it  is  converted  into  coin  and  put  in  circulation.  When  once  in 
circulation,  however,  the  amount  expended  for  bullion  would  be 
reimbursed  by  the  new  coins  and  a  profit  of  from  30  to  40  per  cent 
of  the  face  value  of  the  coins  would  remain  to  be  covered  into  the 
gold  reserve.  In  other  words,  the  coin  would  pay  for  itself  in  much 
the  same  manner  as  the  minting  of  gold  under  free  coinage.  The 
difference  would  be  that  in  the  case  of  the  silver  coins  issued  under 
the  exchange  standard,  their  deficiency  in  intrinsic  value  would  be 
made  up  by  the  seigniorage  profit,  which  would  be  set  aside  as  a 
gold  reserve. 

If  the  transaction  were  entrusted  to  bankers  willing  to  make 
the  preliminary  advances  for  the  purchase  of  bullion  and  to  assume 
all  the  expenses  of  coinage  and  expert  services  necessary  to  put  the 
system  in  operation,  the  bankers  could  be  compensated  by  an  equi- 
table division  of  profits  between  the  government  and  themselves, 
without  reducing  the  gold  reserve  below  the  point  of  safety.  In- 
deed, in  the  case  of  a  comparatively  small  country,  if  the  bankers 
themselves  were  the  custodians  of  the  reserve,  they  would  un- 
doubtedly be  able  and  willing  to  take  any  necessary  steps  to  main- 
tain parity  in  case  of  unusual  drafts  upon  the  reserve  fund,  so  long 
as  the  government  concerned  was  performing  its  part  in  good  faith 
and  was  maintaining  civil  order. 

Inter  annis  silent  leges.  The  gold  exchange  standard,  in  case 
of  an  upheaval  which  wrecked  the  finances  of  a  country,  would  not 

(625) 


48  The  Annals  of  the  American  Academy 

operate  very  differently  from  any  other  form  of  currency.  If  the 
currency  of  a  country  under  such  conditions  were  gold  coin,  it  would 
be  exported  or  hoarded.  If  it  were  paper,  it  would  drop  to  unknown 
depths.  If  parity  could  not  be  maintained  under  the  exchange 
standard,  the  coins  would  tend  to  fall  to  their  bullion  value  in  silver.^ 
Undesirable  as  such  a  consummation  would  be,  it  would  be  much 
better  than  the  unfathomable  depth  to  which  a  paper  currency 
would  fall. 

It  is  not  necessary  here  to  enter  in  detail  into  the  processes  by 
which  a  new  coinage  based  upon  the  exchange  standard  would  be 
put  in  circulation.  If  the  government  were  redeeming  depreciated 
paper  at  a  fixed  rate,  the  new  coins  would  be  exchanged  for  the 
paper  at  their  gold  value.  If  the  existing  currency  of  the  country 
consisted  of  foreign  coin  or  paper,  for  which  the  government  was 
not  responsible,  such  currency  when  received  for  public  dues  would 
be  disposed  of  to  the  best  advantage  through  the  banks  and  the 
foreign  exchanges  and  the  new  currency  would  be  disbursed  for 
the  obligations  of  the  state.  In  either  of  these  cases,  if  considerable 
amounts  of  the  old  currency  were  in  the  keeping  of  the  banks,  they 
would  be  permitted  to  exchange  the  old  for  the  new  on  equitable 
terms  or  would  be  left  free  to  export  the  foreign  currency  and  to 
substitute  in  their  reserves  the  new  currency  obtained  through  the 
sale  of  foreign  bills  against  such  exportations. 

The  process  of  transition  is  always  one  of  the  most  delicate  phases 
of  the  introduction  of  a  new  currency.  It  is  because  of  the  intrica- 
cies of  the  problem  that  the  co-operation  of  the  banks  would  be 
preferable  in  most  cases  to  direct  action  by  the  government.  All 
these  problems,  however,  would  be  solved  with  equity  and  with 
comparatively  little  disturbance  to  business  if  the  matter  were  en- 
trusted to  a  strong  bank  which  sought  the  services  of  competent  ex- 
perts. Within  a  very  short  period  the  transition  was  accomplished 
in  the  Philippines  and  in  Mexico,  without  serious  disturbance  to 
business  or  to  existing  standards  of  wages  and  prices,  and  in  both 
countries  the  system  has  been  operated  with  such  success,  that  a 

'That  they  would  not  inevitr.bly  fall  to  this  point  is  demonstrated  by  the  pres- 
ent status  of  the  Spanish  silver  coinage,  which  has  an  exchange  value  above  90, 
while  the  bullion  value  of  the  coins  is  below  50.  Two  factors  contribute  to  this 
result, — the  limited  quantity  of  the  coins  and  the  possibility  of  the  resumption  of 
gold  payments, — apart  from  intrinsic  bullion  value,  which  fixes  for  any  given 
moment  the  minimum  below  which  the  exchange  value  of  the  coins  cannot  fall. 

(626) 


Maintenance  of  Monetary  Reform  in  Laiin-.bncrica         49 

large  surplus  has  been  earned  for  the  gold  reserve  fund  from  the 
sale  of  drafts  and  from  interest  on  the  deposit  of  the  fund  in  foreign 
financial  centers. 

In  both  countries,  while  an  ample  local  currency  remains  always 
in  circulation,  it  responds  in  substantially  the  same  automatic  man- 
ner as  a  currency  of  gold  and  bank-notes  to  the  changes  in  the  de- 
mand for  circulating  capital  and  the  movement  of  the  foreign  ex- 
changes. This  it  does  through  the  sale  of  drafts  upon  gold  funds 
abroad  and  the  temporary  retirement  of  the  currency  thus  employed, 
until  it  shall  be  called  into  tise  again  by  a  counter-movement  of  the 
exchanges.  In  both  countries  the  soundness  and  exchangeability  of 
the  currency  is  never  called  in  question,  and  at  the  height  of  panic 
in  New  York  in  1907  international  bankers  availed  themselves  of 
the  financial  tranquillity  existing  at  Manila,  to  transfer  funds  to  the 
beleaguered  metropolis  through  the  automatic  working  of  the  ex- 
change fund,  in  order  to  mitigate  the  currency  famine  which  had 
caused  suspension  of  currency  payments  under  the  defective  mone- 
tary system  of  North  America. 


(627) 


CURRENT  MISCONCEPTIONS  OF  TRADE  WITH  LATIN- 
AMERICA 


By  Hugh  MacNair  Kahler, 

Editor   of   'How  to   Export;"   Vice-President   Latin-American    Chamber   of 
Commerce;  Publisher  of  the  Spanish  periodicals  "America"  and  "Ingenieria." 


Generalities  on  commercial  subjects  are  deceptive.  Much  of 
the  popular  misunderstanding  of  our  Latin  neighbors  grows  out  of 
the  inclusive  title  which  for  convenience  we  are  accustomed  to  apply 
to  the  twenty  republics  which  occupy  the  rest  of  our  continent. 

The  name  is  applied  to  a  territory  so  vast  and  a  range  of  condi- 
tions and  populations  so  varied  that  its  extremes  have  absolutely 
nothing  in  common.  And  one  of  the  most  general  of  our  American 
delusions  on  the  subject  grows  out  of  the  very  natural  inference 
that  Latin-America  stands  for  certain  definite,  concrete  and  in- 
variable elements. 

This,  and  a  host  of  other  forms  of  ignorance  are  so  easily  cor- 
rected by  reference  to  readily  accessible  facts  that  scant  attention 
should  be  devoted  to  them  in  such  a  paper  as  this.  That  Latin- 
America  includes  countries  of  all  sorts  and  conditions,  climates 
ranging  from  the  very  hottest  tropics  to  the  frigid  antarctic  zone, — 
with  a  corresponding  variety  of  products, — populations  of  totally 
distinct  origin,  speech,  habits,  needs  and  ambitions,  is  visible  in 
every  school  geography,  and  it  should  be  no  part  of  such  a  dis- 
quisition as  this  to  mention  such  facts.  And  although  errors  arising 
from  ignorance  of  these  truths  are  still  the  commonest  and  most  dam- 
aging of  all  the  host  of  misconceptions  which  militate  against  our 
commercial  progress  in  Latin-America,  there  can  be  no  question  as 
to  the  rapidity  with  which  they  are  disappearing  with  the  advent 
of  a  vital  and  general  need  for  the  patronage  of  our  southern 
neighbors. 

This  common  error  should,  however,  be  corrected  first  of  all. 
Hayti  and  Chile  have  absolutely  not  a  single  point  in  common  save' 
religion,  and  scarcely  can  be  said  to  share  even  that.  Brazil  and 
Bolivia,  though  neighboring  countries,  diflfer  radically  in  race,  cli- 

(628) 


Misconceptions  of  Trade  with  Latin-America  51 

mate,  products,  speech,  and  all  other  important  features,  and  Ar- 
gentina, while  differing  almost  as  vitally  from  Bolivia  is  quite  as 
different  from  Chile  and  Brazil,  its  other  neighbors.  Obviously, 
the  very  general  tendency  to  make  no  distinction  whatever  between 
these  widely  different  constituent  elements,  exercises  a  decidedly 
unfavorable  effect  upon  the  careless  attempt  to  win  their  patronage. 
And  there  is  no  easy,  general  means  of  setting  the  matter  plain,  for 
the  reason  that  in  different  lines  of  business  the  division  of  the  ter- 
ritory and  the  alteration  of  the  methods  by  which  it  is  to  be  ap- 
proached successfully,  will  vary  as  widely  as  the  lines  of  business 
or  as  the  countries  themselves.  For  example,  Argentina  and  Chile 
are  very  similar  so  far  as  their  requirements  in  clothing  are  con- 
cerned, since  the  tastes  and  means  of  their  populations  and  the  de- 
mands of  their  climates  are  nearly  identical.  Yet  as  fields  for  the 
sale  of  mining  machinery,  they  are  very  far  apart,  Chile  offering  an 
excellent  and  highly  developed  market,  and  Argentina  holding  forth 
almost  no  prospect  at  all. 

Such  errors  as  this,  however,  are  matters  of  ignorance,  errors 
of  general  information,  of  premise.  Their  correction  requires  only 
the  rudimentary  investigation  which  can  be  made  by  any  business 
man  without  other  facilities  than  an  atlas.  This  paper  cannot  con- 
cern itself  with  the  manifold  details  by  which  a  clear,  accurate 
knowledge  of  the  varied  conditions  obtaining  in  this  territory  can 
be  gained.  It  must  be  limited  to  the  more  involved  misconceptions 
which  grow  out  of  faulty  logic  rather  than  insufficient  knowledge, 
whose  correction  is  a  matter  for  careful  thought,  rather  than  super- 
ficial investigation. 

Commonest  of  all  such  delusions  affecting  our  commerce  with 
Latin-America  is  the  very  deeply  rooted  and  nearly  universal  belief 
that  Europe  is  a  preferable  field  for  export  effort.  This  error  has 
a  solid  foundation  in  truth.  Until  one  year  ago  Europe  was  un- 
questionably our  best  foreign  customer.  But  until  one  year  ago  the 
major  portion  of  our  exports  had  consisted  of  raw  products,  grains, 
meats,  textiles,  crude  metals,  rough  timber,  etc.,  which  naturally 
found  their  logical  market  in  the  crowded  manufacturing  countries 
of  Europe,  where  such  products  have  been  items  of  imports  for  from 
fifty  years  to  a  century  or  more.  A  ery  reasonably  we  considered 
Europe  as  our  best  export  market.  So  long  as  we  were  primarily 
a  nation  of  farmers,  no  other  territory  could  offer  t^s  a  fraction  of 

(629) 


52  The  Annals  of  the  American  Academy 

the  inducements  held  forth  by  the  hungry,  overcrowded  manufac- 
turing cities  of  England  and  the  continent. 

But  in  the  year  1910,  for  the  first  time,  our  exports  of  manu- 
factured goods  exceeded  our  foreign  sales  of  raw  products.  The 
former  showed  a  consistent  and  heavy  increase  for  a  number  of 
years  back.  The  latter  displayed  a  slight  but  consistent  decline 
during  the  same  period.  We  are  no  longer  a  farming  nation,  save 
for  our  own  needs.  Our  surplus,  for  export,  will  hereafter  tend 
steadily  toward  the  more  involved  types  of  manufactured  goods 
which  leave  us  the  maximum  number  of  profits  and  bring  us  the 
maximum  price  abroad. 

But  with  a  surplus  of  manufactures  to  sell  abroad,  it  by  no 
means  follows  that  those  who  have  been  readiest  to  purchase  our 
wheat  and  beef  will  be  the  first  to  make  us  offers  on  our  machinery 
and  cloth.  On  the  contrary,  we  find  ourselves  in  direct  competition 
with  these  former  customers  of  ours,  and  under  the  necessity  of  find- 
ing a  neutral  market,  where  our  merchandise  shall  have  at  least  a 
fair  field,  without  favor,  which  we  can  never  expect  to  attain  in 
these  competing  lands  themselves. 

Despite  this  obvious  truth,  and  notwithstanding  its  self-evident 
nature,  comparatively  few  American  business  men  have  as  yet  re- 
alized it.  It  is  quite  commonly  advanced,  in  serious  commercial 
papers,  that  because  England  buys  our  wheat,  it  must  be  a  logical 
market  for  our  harvesting  machines,  whereas  the  precise  contrary  is 
obviously  true,  the  need  for  imported  wheat  being  excellent  prima 
facie  evidence  of  the  scant  requirement  for  harvesters. 

This,  like  all  generalities,  is  of  course  deceptive.  It  is  true  only 
in  the  main  and  in  the  majority  of  cases,  with  a  vast  number  of  more 
or  less  important  exceptions.  Europe  still  presents  a  splendid  market 
for  many  manufactured  lines,  and  Latin-America  still  purchases 
certain  raw  products.  But  in  the  main  it  may  be  stated  categorically, 
that  our  manufactures  will  find  their  best  acceptance  in  non-manu- 
facturing, but  wealthy,  lands,  such  as  Latin-America,  and  that  w^e 
shall  gradually  be  forced  out  of  the  protected  markets  of  crowded 
manufacturing  territory,  such  as  Europe. 

Even  the  most  notably  successful  lines  of  American  manufac- 
ture, which  have  almost  dominated  the  European  market  since  their 
origin,  prove  this  assertion  rather  than  contradict  it.  Among  these, 
typewriting  machines  present  perhaps  the  most  striking  example.    In 

(630) 


Misconceptions  of  Trade  z^'itli  Latin-America  53 

this  case,  commercial  conditions  are  vastly  in  favor  of  American 
export  as  opposed  to  local  manufacture  for  the  European  markets. 
The  American  domestic  market  was  by  far  the  largest  individual 
field  for  such  an  innovation.  Commercial  tradition  here  had  not 
solidified  into  the  rigid  prejudice  which  still  exists  in  Europe,  and  the 
machine  met  a  wide  and  ready  acceptance  in  America  which  enabled 
its  inventors  to  manufacture  on  the  enormous  scale  \\'hich  is  most 
favorable  to  the  economic  production  of  such  an  article.  Each 
individual  European  market  was  relatively  small,  and  hampered, 
as  well,  by  the  ancient  traditions  of  commerce  which  vigorously  op- 
posed the  innovation.  European  manufacturers,  even  with  cheaper 
skilled  labor,  plenty  of  power,  material  and  capital,  and  a  tariff 
protection  as  well,  saw  scant  incentive  toward  local  competitive 
manufacture,  and  the  field  was  left  almost  entirely  to  Americans, 
who  spent  enormous  amounts  of  time  and  money  in  its  development. 

In  spite  of  the  unfavorable  conditions,  a  market  was  created 
and  enlarged.  European  branches  began  to  show  heavy  profits 
instead  of  losses.  But  no  sooner  had  this  become  manifest  than  the 
European  manufacturers  entered  the  field,  and,  in  spite  of  the  ex- 
pensively acquired  prestige  of  the  American  machines,  speedily  be- 
gan to  command  a  considerable  share  of  the  local  trade  and  even 
to  compete  for  export.  To-day  in  neutral  as  well  as  protected  mar- 
kets German  and  French  typewriters  compete  quite  notably  with  the 
American  machines. 

Opposed  to  the  inevitable  competition  which  successful  export 
of  manufactured  goods  to  Europe  must  invite,  Latin-America  pre- 
sents a  field  in  which  the  possibility  of  local  manufacture  is  so  re- 
mote as  to  be  quite  outside  of  present  consideration.  Not  only  are 
all  the  essential  conditions  for  successful  manufacture  lacking  in 
nearly  all  of  the  territory,  but  the  incentive  is  absent  as  well. 
Latin-America  draws  its  income  from  the  production  and  export  of 
a  few  agricultural  products,  certain  precious  metals,  a  few  textiles 
and  a  relatively  insignificant  amount  of  hard  woods.  Its  principal 
sources  of  revenue  lie  in  rubber  and  chocolate  and  cofifee,  aside 
from  the  grain  and  beef  of  Argentina  and  Uruguay  and  the  nitrates 
of  Chile.  And  rubber  and  chocolate  are  nearly  unique  in  two  re- 
spects. First,  their  price  has  almost  no  relation  to  their  cost  of 
production,  the  demand  being  far  in  excess  of  the  supply,  and  sec- 
ond, their  production  does  not  exhaust  the  soil,  but  can  be  continued 

(631) 


54  The  Annals  of  the  American  Academy 

indefinitely,  with  little  attention,  without  fertilizer,  and  with  prac- 
tically no  skilled  labor  or  machinery.  Under  such  conditions,  even 
an  increasing  population  can  scarcely  bring  about  the  establishment 
of  the  less  profitable  manufacturing  industries,  for  which  the  larger 
portions  of  the  territory  are,  be  it  remembered,  topographically  and 
climatically  unfitted,  and  which  require  capital,  skilled  labor  and 
close  attention  both  to  production  and  to  sales.  In  brief,  Latin- 
America,  is  in  the  main  so  suited  to  the  primitive  industries  and 
enjoys  such  an  immense  return  from  those  industries,  that  it  is 
almost  inconceivable  that  manufacturing  pursuits  will  ever  materially 
command  the  energy  and  resources  of  the  Latin-American  peoples. 

With  a  foreign  commerce  of  considerably  more  than  two 
billions  a  year,  affecting  only  thirty  or  forty  millions  of  population, 
at  the  most,  Latin-America  is  and  must  continue  to  be  an  ex- 
ceedingly wealthy,  even  luxurious,  territory,  demanding  as  necessi- 
ties all  the  adjuncts  of  a  complex,  modern  civilization. 

To  be  sure,  its  present  capacity  in  certain  lines  is  much  inferior 
to  that  of  Europe.  But  it  should  always  be  borne  in  mind  that  its 
capacity  must  increase,  without  danger  of  local  competition,  while 
that  of  Europe  will  in  all  probability  decrease,  and  suffer,  moreover, 
from  increasingly  bitter  local  competition. 

It  is  peculiarly  illustrative  of  our  immature  views  on  export, 
that  precisely  those  wdio  are  most  thoroughly  imbued  with  the  idea 
that  Europe  is  our  best  market,  should  hold  also  to  the  diametrically 
opposite  delusion,  equally  incorrect,  that  European  competition 
shuts  us  out  of  such  neutral  markets  as  Latin-America,  and  even 
threatens  our  home  market  unless  barred  out  by  a  steadily  rising 
tariff  wall. 

Like  most  of  our  errors  regarding  Latin-America,  this  delusion 
has  a  sound  foundation  in  fact.  There  can  be  no  question  as  to  our 
inability  to  compete  with  European  manufacturers  in  certain  lines, 
providing  price  is  the  sole  factor.  And  failure  to  take  into  account 
the  significance  of  that  proviso,  as  we  have  learned  it  in  our  home 
trade,  constitutes  the  error. 

It  would  be  regarded  as  laughable  folly  should  the  aristocratic 
tailor  to  the  wealthy  clubman  seek  protection  against  the  cheap 
competition  of  the  humble  dealer  in  cast-offs.  The  maker  of  the 
luxurious  motor  car  does  not  complain  of  the  ruinously  cheap 
competition  of  the  trolley  and   subway,   and  the  makers  of   fine 

(632) 


Misconceptions  of  Trade  2ciih  Latin-America  55 

watches  find  that  the  wide  sale  of  cheap,  machine-made  timepieces 
aids  rather  than  hinders  the  traffic  in  their  goods.  In  a  word,  we 
have  come  to  reahze  better  than  any  other  commercial  people,  that 
price  is  by  no  means  the  deciding  factor  in  many,  if  not  in  the  actual 
majority  of  lines.    And  this  is  exceedingly  true  of  export. 

English,  German,  French,  Belgian  and  Italian  competition  in 
certain  lines  would  be  impossible  to  meet  were  our  arguments  con- 
fined to  prices.  But  on  a  basis  of  quality,  convenience,  economy, 
strength,  efficiency,  comfort,  luxury  or  taste,  competition  is  not  only 
practicable  but  comparatively  easy.  To  this  there  are  certain  ex- 
ceptions, as  to  every  general  assertion,  but  it  is  hard  to  mention  a 
line  in  which  we  do  not  meet  with  at  least  a  fair  degree  of  success 
in  any  reasonably  neutral  market. 

The  predominance  of  certain  European  nations  in  the  Latin- 
American  markets  is  due  almost  entirely  to  the  fact  that  they  began 
long  ago  to  solicit  that  trade  and  to  serve  it  with  some  degree  of  in- 
telligence. A  recently  published  interview  with  Napoleon,  during 
his  brief  sojourn  in  Elba,  as  related  by  an  English  hardware  manu- 
facturer who  visited  the  Emperor  there,  is  illuminating, 
in  this  direction.  It  discloses  the  fact  that  just  a  century  ago  the 
English  manufacturers  had  succeeded  in  forcing  an  entrance  into  the 
closed  market  of  the  River  Plate,  then  a  dependency  of  Spain.  And 
at  that  time  they  were  not  only  distributing  their  goods  free  of  all 
charges,  but  were  going  to  considerable  expense  to  educate  the 
colonials  in  their  use  and  advantages.  Here  is  the  real  reason  for 
England's  present  position  in  the  Argentine  market.  It  is  not  to 
be  found  in  any  other  feature  of  English  export  methods,  which, 
as  a  whole,  are  by  no  means  so  intelligent  as  we  are  led  to  believe 
by  those  pessimists  w'ho  see  no  future  for  us  in  export,  and  par- 
ticularly little  in  export  to  Latin-America. 

European  predominance,  where  it  exists,  is  due  very  largely  to 
priority,  and  in  a  relatively  insignificant  degree  to  lower  prices, 
more  intelligent  methods,  or  better  facilities.  And  European  pre- 
dominance is  by  no  means  so  extensive  as  it  might  appear,  which  is 
another  misconception  which  merits  individual  attention. 

English  sales  to  Brazil,  for  example,  are  much  larger  than  ours, 
despite  a  certain  degree  of  reciprocity  in  tariff  arrangements  which 
favors  us.  But  on  examining  the  nature  of  English  exports  to 
Brazil,  it  appears  that  more  than  the  entire  excess  over  our  own 

(633) 


56  The  Aiiiials  of  tJic  American  Academy 

sales  is  made  up  of  coal,  coke,  cinders,  jute  bags  and  cotton  yarns! 
None  of  these  is  an  item  in  our  own  exports,  and  none  of  them  offers 
any  great  volume  of  profit  to  the  seller.  Quite  frequently  an  ap- 
parently enormous  difference  between  our  sales  and  those  of  some 
European  nation  can  be  accounted  for  in  the  same  manner — Spain, 
with  her  wines  and  grapes;  France,  with  her  wines,  liqueurs  and 
clothing;  Italy,  with  macaroni  and  olive  oil;  Germany,  with  dye- 
stuffs  and  toys,  all  hold  a  large  volume  of  trade  without  fear  of 
competition,  just  as  we  ourselves  hold  the  field  in  typewriters, 
phonographs,  sewing  machines  and  harvesters. 

The  real  advantage  of  European  priority  in  the  Latin-Amer- 
ican market  lies  in  the  more  highly  developed  commercial  machinery 
which  this  older  commerce  has  called  into  being,  and  which  has  in 
turn  served  to  enlarge  and  perpetuate  that  commerce.  Shipping 
and  mail  facilities,  international  banking  and  mercantile  corpora- 
tions, a  closer  mutual  acquaintance  and  understanding,  all  of  these 
things  are  creations  of  trade  rather  than  creators  of  it.  And  this 
brings  us  to  another  very  common  illusion  on  the  part  of  Americans, 
who  frequently  refrain  from  effort  toward  Latin-American  trade 
because  of  the  lack  or  inferiority  of  these  adjuncts  of  commerce. 
Indeed,  there  are  a  number  of  very  influential  organizations  en- 
gaged in  endeavors  to  create  this  commercial  machinery  by  treaty, 
by  act  of  Congress  or  by  private  benefactions,  with  a  view  to  placing 
our  foreign  trade  efforts  on  a  basis  of  equality  with  those  of  Europe. 

Honest  endeavor  of  any  sort  is  deserving  of  something  better 
than  ridicule,  yet  it  is  hard  to  refer  to  these  misguided  enthusiasts 
without  a  touch  of  sarcasm,  at  least.  A  bank,  a  steamer  line,  a  com- 
mercial agency,  are  purely  business  institutions,  and  cannot  exist 
properly  on  a  basis  of  philanthropy.  In  plain  language,  a  bank  does 
not  prosper  if  it  must  create  the  conditions  by  which  it  exists,  a 
steamer  line  cannot  show  dividends  if  it  must  create  a  market  for  its 
cargo  and  a  source  for  its  return  cargo.  That  we  have  not  already 
built  up  such  incidental  institutions  to  export  trade  is  due  simply  to 
the  fact  that  until  last  year  we  were  not  actually  engaged  in  export, 
for  the  main  part,  but  were  devoting  the  greater  share  of  our  ener- 
gies to  the  production  of  raw  goods  wdiose  foreign  sale  was  a  matter 
of  accident  and  not  of  design.  The  banks,  steamship  lines,  credit 
facilities  and  similar  conveniences  wdiich  European  exporters  enjoy 
to-day  are  the  outgrowth  of  their  older  export  endeavor.    We  shall 

(634) 


Misconccplioiis  of  Trade  z^'iili  Lalin-Amcrica  57 

have  these,  and  belter,  before  our  export  effort  is  as  old  as  that  of 
Europe  is  to-day,  but  their  origin  and  prosperity  must  of  necessity 
follow  rather  than  precede  the  demand  for  their  services.  Greater 
New  York  prospers  to-day  because  of  its  rapid  transit  systems,  yet 
it  would  be  self-evident  folly  to  assert  that  had  such  a  system  been 
established  fifty  years  ago,  New  York  would  have  been  able  to  use 
it  economically  and  to  profit  by  it.  Instead  of  building  up  the  city, 
the  operation  of  such  a  system  would  assuredly  have  bankrupted  it. 

The  matter  of  credits,  briefly  mentioned  above  involves 
another  misconception  of  wide  and  disastrous  effect.  Many 
American  manufacturers  absolutely  abstain  from  entry  into  the 
Latin-American  field  because  of  an  essentially  incorrect  impres- 
sion that  success  there  requires  protracted  credits  on  unsafe  grounds. 
Nothing  could  be  further  from  the  fact.  Of  our  present  very  credit- 
able showing  of  sales  to  Latin-America, — of  about  one-eighth  of 
that  territory's  total  imports, — it  is  conservative  to  state  that  more 
than  one-half  are  cash  transactions,  in  which  the  manufacturer  re- 
ceives his  full  payment  before  parting  with  his  merchandise.  No 
more  definite  rebuttal  of  the  delusion  of  necessary  credits  could  be 
desired.  But  it  is  quite  true  that  long  dealings  with  European 
houses,  who,  among  customers  of  many  years'  standing  are  willing 
to  give  liberal  time  accommodations,  have  led  certain  Latin-Amer- 
ican houses  to  ask  for  credits  which  would  appear  slightly  longer 
than  those  commonly  extended  to  the  same  class  of  trade  in  this 
country.  But  such  cases  are  comparatively  rare,  and  when  they 
arise,  it  is  usually  entirely  practicable  to  arrange  some  compromise 
mutually  satisfactory.  And  the  unwillingness  of  the  American 
manufacturer  to  extend  the  credit  is  usually  due  less  to  his  inability 
to  meet  the  terms  desired  in  point  of  time,  than  to  his  instinctive  dis- 
trust of  the  honesty  and  solvency  of  his  foreign  customer. 

Naturally,  no  credit  transaction  can  be  considered  advisable 
unless  the  buyer  is  able  to  present  reasonable  proofs  of  his  worthi- 
ness. And  the  relative  difficulty  of  securing  information  as  to  the  re- 
sources of  a  Latin-American  business  house,  inclines  the  American 
to  distrust  it.  As  a  matter  of  fact,  the  level  of  business  morality  in 
all  Latin-America  is  far  higher  than  here  at  home.  Fraudulent 
bankruptcy  is  nearly  impossible,  because  of  rigorous  governmental 
inspection  of  books,  and  a  record  of  business  and  bank  failures 
throughout  Latin-America  would  show  so  remarkably  few  instances 

(635) 


58  The  Annals  of  the  American  Academy 

that  no  American  would  be  willing  to  believe  it.  This  somewhat 
theoretical  statement  is  amply  confirmed,  moreover,  by  the  ex- 
perience of  those  who  have  learned  to  extend  credits  to  their  Latin- 
American  trade  as  readily  as  they  oblige  their  domestic  customers. 
Without  exception  the  largest  shippers  of  this  class  testify  that  their 
losses  abroad  from  unwise  credits  are  negligible  compared  with 
losses  at  home,  figured  proportionately  and  not  on  the  aggregate 
business. 

A  further  incorrect  impression  exercising  a  deterrent  influence 
on  Americans  who  could  profitably  enter  the  Latin-American  field, 
grows  out  of  the  anxiety  of  certain  advocates  of  a  ship  subsidy. 
These  persons  strengthen  their  plea  by  belittling  our  present  ship- 
ping facilities,  until  it  is  not  remarkable  that  many  Americans 
should  believe  that  we  have  no  facilities  for  the  transfer  of  freight 
to  Latin-American  points.  It  is  no  more  than  the  truth  that  our 
freights  to  these  countries,  as  to  all  others,  are  carried  almost 
entirely  by  the  ships  of  foreign  nations.  We  have  not  found  marine 
carrying  a  profitable  field  for  our  capital  and  our  energies  and  have 
left  it  to  those  who  are  willing  to  undertake  more  risk  and  labor  for 
a  smaller  return  than  we  can  accept.  But  there  has  never  been,  nor 
can  there  ever  be,  any  lack  of  carriers  for  all  goods  which  we  can 
sell  abroad.  The  ocean  carrier  is  not  limited  to  any  one  course.  He 
brings  his  ships  wherever  cargoes  are  to  be  found,  and  though  local 
prices  may  occasionally  rise  slightly  through  unexpected  increases 
in  freights,  there  is  not,  there  never  has  been,  and  there  never  can  be, 
any  definite  shortage  in  the  supply  of  carriers.  This  is  a  categorical 
denial  of  contrary  statements,  without  other  proof  than  the  reader's 
common  sense.  As  for  the  relative  merits  of  foreign  and  American 
merchant  ships,  that  is  a  question  which  has  nothing  to  do  with 
Latin-America,  and  which  need  not  enter  into  the  present  discussion. 
Such  are  the  chief  misconceptions  of  commerce  with  Latin- 
America.  It  is  evident  that  no  attempt  has  been  made  to  treat 
specifically  the  host  of  minor  errors  which  are  far  more  common 
than  correct  views.  As  has  been  said,  these  minor  mistakes  arise 
from  basic  ignorance  of  easily  discovered  facts,  from  an  imper- 
fect knowledge  of  history  and  geography  which  a  brief  return  to 
the  text-books  of  primary-school  days  would  suffice  to  remove.  And 
it  is  pleasant  to  chronicle  the  rapid  diminution  in  these  more  ele- 
mentary and  more  harmful  delusions,  under  the  impetus  of  our  new- 

(636) 


Misconceptions  of  Trade  witli  Latin-America  59 

born  need  for  a  growing,  profitable  foreign  outlet  for  manufactured 
goods.  The  day  is  not  far  distant  when  most  Americans,  instead 
of  a  very  few,  will  realize  that  a  Spanish  catalogue  in  Hayti  or  Brazil 
is  unproductive,  that  skates  are  not  in  demand  in  Venezuela  or 
Cuba,  that  it  is  better  to  export  flour  to  Brazil  and  harvesters  to 
Argentina  than  to  seek  outlets  for  both  in  both  countries.  We 
shall  learn,  too,  to  meet  courtesy  with  courtesy,  to  study  the  Latin 
trend  of  thought,  to  observe  our  field  and  to  interpret  intelligently 
the  conditions  under  which  we  must  lalior.  We  shall  assuredly 
overcome  these  problems,  for  we  already  feel  the  pinch  of  necessity. 
Dropping  criticism,  there  is  much  ground  for  pride  in  our 
accomplishment  thus  far.  Indeed,  if  we  require  proof  of  the  ulti- 
mate success  of  American  export  endeavor  in  Latin-America,  we 
need  only  survey  the  deeds  which  have  been  done  in  the  last  decade 
to  realize  that  not  even  we  ourselves  can  prevent  our  final  and 
complete  domination  of  what  unquestionably  is  to  be  the  greatest 
import  market  the  world  has  ever  known. 


(637y 


INVESTMENT    OF    AMERICAN    CAPITAL    IN    LATIN- 
AMERICAN  COUNTRIES 


By  Wilfred  H.  Sciioff, 

Secretary,  Commercial  Museum,  Philadelphia. 


Interest  in  foreign  investments  is  a  new  feature,  comparatively 
speaking,  in  American  business.  Until  recent  years  the  United 
States  sought  capital  and  had  no  reserve  to  offer  for  financing  enter- 
prises beyond  its  own  borders.  Word  of  golden  opportunities,  prom- 
ising returns  even  beyond  those  anticipated  from  the  domestic  field, 
was  met  by  the  objection  that  American  savings  should  be  employed 
as  a  matter  of  patriotic  principle  in  American  undertakings,  and 
that  every  bridge  or  railroad  or  street-car  line  built  in  a  foreign  coun- 
try meant  one  less  at  home,  of  which  we  stood  in  greater  need. 
Under  such  conditions  it  was  natural  that  our  regard  for  our  sister 
republics  was  sentimental  rather  than  practical,  and  that  however 
much  we  might  declaim  against  political  or  territorial  aggression 
threatened  by  foreign  powers,  we  had  no  objection  to  the  assump- 
tion by  our  neighbors  of  obligations  for  current  needs,  as  well  as 
improvements,  which  placed  them  under  the  control  of  influences 
far  more  real  than  our  proclamation  of  an  international  doctrine. 
The  story  of  the  first  century  of  Latin-American  independence  was 
then,  like  our  own,  a  record  of  improvements  made  by  the  goodwill 
of  financiers  in  London  and  Paris,  under  bond-issues  marketed  In 
competition  with  our  own  demands. 

The  result  was  a  matter  of  course.  English  capital  provided 
for  the  construction  of  railway  lines  for  bringing  down  the  coffee 
crop  of  Brazil  for  shipment,  largely  to  the  American  market ;  Eng- 
lish capital  made  possible  the  harbor  improvements,  the  sanitation  of 
the  cities,  the  extension  of  credit  upon  the  season's  crop,  the  arrange- 
ment of  the  national  finances  so  as  to  meet  deficits  arising  from 
lack  of  resources,  extravagance  or  inexperience  in  many  places. 
Similarly  in  the  River  Plate  republics,  Argentina  and  Uruguay,  it 
was  English  capital  that  made  possible  the  opening  of  vast  tracts 
to  cultivation,  the  transportation  of  the  crop  to  the  seaports,  the 
economical  handling  and  shipment  of  it  to  the  consumers  of  the 

(638) 


American  Capital   in   Latin-.hncrican   Countries  6i 

old  world.  To  such  an  extent  was  English  capital  involved  in  these 
undertakings  that  a  bad  season  or  two  meant  the  downfall  of  a 
great  London  banking-house  a  score  of  years  ago,  bringing  on  a 
period  of  stringency  and  liquidation  felt  throughout  the.  world  for 
several  years. ^ 

Large  investments  in  public  and  private  securities,  bringing 
dependence  on  the  London  market,  led  naturally  to  the  establishment 
of  English  banks  from  the  Amazon  to  the  River  Plate,  which  have 
grown  and  prospered  with  the  development  of  the  countries  they 
serve,  and  which  are  to-day,  after  a  century  of  operation,  among  the 
strongest  and  most  respected  financial  institutions  in  the  whole 
world,  uniformly  paying  large  dividends  and  strengthening  their 
position  from  year  to  year. 

The  greatest  of  the  Latin-American  republics  then  are  bound 
to  England  by  every  tie  of  interest  and  gratitude,  from  the  placing 
of  their  crops  to  the  marketing  of  them  at  the  point  of  destination; 
shipment  being  made  very  largely  in  English  cars,  on  English  rails, 
through  an  English-built  terminal  to  English-built  warehouses, 
whence  it  is  carried  in  English  bottoms  and  sold — more  than  half 
of  it — in  the  English  market.  And,  in  return,  it  is  no  more  than 
natural  that  the  steamers  should  carry  out  English  manufactures 
on  their  return  voyage  and  that  there  should  be  a  predominance  of 
English  trade,  which  is  because  England  is  situated  so  well  as 
regards  encouragement,  development  and  stimulation. 

To  a  less  degree  and  of  later  upbuilding  is  the  participation  of 
the  other  European  countries  in  the  affairs  of  Brazil  and  Argentina ; 
but  their  influence  is  now  being  extended  rapidly  and  profitably,  so 
that  German,  French,  Spanish  and  Italian  banks  and  trading  houses 
are  found  side  by  side  with  the  English,  taking  away  little  or  nothing 
from  the  share  of  the  first  comer,  but  building  up  their  profits  on 
the  exploitation  of  the  growing  countries.  Conspicuously  absent 
from  the  list  are  financial  institutions  acting  for  the  United  States. 

Such  are  the  conditions  that  are  to  be  faced  as  our  own  country 
passes  from  the  list  of  those  constantly  seeking  loans  to  the  company 
of  the  older  nations  having  surplus  resources,  the  investment  of 
which,  in  foreign  undertakings  yielding  larger  profits  than  those 
now  customary  at  home,  may  by  the  very  fact  of  such  larger  profits 
tend  toward  an  easier  condition  in  the  market  for  domestic  under- 

'Failurc  of  Baring  Bros,  in   1800. 

(639) 


62  The  Annals  of  the  American  Academy 

takings.  For  there  can  be  no  question  that  in  the  less  developed 
countries  there  are  many  legitimate  opportunities  promising  a  richer 
return  than  is  usual  at  home,  and  that  such  investments  must 
strengthen  our  own  position  and  further  stimulate  our  own  develop- 
ment. And  in  that  direction  follow  the  extension  of  trade,  the 
advancement  of  commerce  and  industry,  and  the  better  realization 
of  that  noble  dream,  the  sisterhood  of  the  American  nations. 

It  has  been  a  common  complaint  for  years  that  our  trade  rela- 
tions with  the  Latin-American  countries  are  not  what  they  should 
be.  In  one  sense  that  may  be  granted,  namely,  that  our  efforts  in 
that  direction  are  not  what  they  should  be.  On  the  other  hand,  it 
might  be  said  that  they  are  as  good  as  could  be  expected,  and  that 
the  doubling  of  our  trade  in  the  past  decade  is  evidence  that  our 
neighbors  are  willing  to  meet  us  at  least  halfway.  The  mere  fact 
that  we  buy  more  than  we  sell  is  of  little  moment ;  the  same  is  true 
of  our  European  competitors.  The  Latin-American  republics,  owing 
to  their  relative  condition  of  development,  require  a  large  balance 
of  trade  to  meet  their  obligations  and  to  provide  for  improvements ; 
and  this  state  of  things  may  be  expected  to  continue  indefinitely. 
Neither  is  the  absence  of  vessels  under  the  American  flag,  often 
urged  as  a  discouraging  factor,  any  real  reason  for  the  relatively 
poor  showing  of  our  trade.  Steamers  of  other  nationalities  there 
are  in  plenty,  offering  frequent  sailings  from  our  ports  and  excellent 
accommodations,  and,  it  is  to  be  feared,  returning  to  their  share- 
holders a  lower  rate  of  dividend  than  American  investors  are  accus- 
tomed to  expect.  The  decadence  of  our  merchant  marine  is  a 
question  of  national  importance,  but  so  long  as  cheap  and  frequent 
ocean  freights  are  offered,  it  has  only  indirectly  an  influence  on  our 
foreign  trade.     It  is  a  question  apart. 

Of  more  importance  is  the  reason,  also  frequently  urged,  that 
there  are  no  American  banks.  This  is  very  near  the  root  of  the  mat- 
ter. For  while  in  matters  of  exchange  alone,  it  is  entirely  feasible 
under  existing  facilities  to  finance  any  transaction  of  international 
trade  with  our  sister  republics,  the  absence  of  American  banking 
houses  means  the  absence  of  Americans  interested  in  making  loans 
and  investments,  in  creating  those  conditions  of  prosperous  devel- 
opment which  in  turn  create  a  market  for  foreign  goods  and  lead  the 
beneficiary  to  turn  naturally  for  advice  and  for  trade  to  his  benefac- 
tor.    This  is  the  weakest  point  in  our  present  relations  with  Latin- 

(640) 


American  Capital  in  Latin-American  Countries  63 

America.  Our  position  is  selfish.  We  offer  a  surplus  stock  of  goods, 
not  always  in  a  way  to  suggest  interest  in  continuous  relations,  and 
we  tender  no  assistance  that  can  be  compared  with  that  offered  by 
our  competitors.  Investment  of  capital  in  legitimate  development 
is  the  surest  way  to  bind  these  republics  to  us  in  friendly  relations 
and  in  mutual  commerce. 

South  of  our  borders,  on  the  American  continent,  are  seventeen 
republics;  in  the  Antilles,  three.  Between  Texas  and  the  Isthmus 
our  trade  is  predominant;  in  the  continent  of  South  America  we 
hold  a  minor  place,  except  in  a  few  great  staples ;  coffee  and  rubber 
on  the  one  hand,  flour  and  oil  on  the  other.  Yet  if  from  the  cur- 
rent statistics  of  commerce  we  turn  back  a  couple  of  decades,  we 
shall  find  that  no  great  while  before  Blaine's  call  for  the  first  Pan- 
American  Congress,  this  country  was  second  to  Great  Britain  in 
the  trade  of  every  one  of  the  Latin-American  republics.  Even  our 
next-door  neighbor,  Mexico,  now  bound  to  us  by  the  closest  ties  of 
commercial  dealing,  involving  nearly  three-quarters  of  the  total  vol- 
ume of  her  trade,  was  then  dealing  to  a  proportion  of  nearly  three- 
fifths  with  England.  Central  America  was  neglected,  except  for 
the  project  of  an  interoceanic  canal;  Cuba,  under  the  Spanish  com- 
mercial system,  took  her  trade  across  the  ocean  instead  of  over  the 
Florida  Channel ;  South  America  was  a  region  relatively  unknown, 
its  possibilities  so  little  understood  that  an  American  consul  at 
Buenos  Aires  under  the  Harrison  administration  prepared  a  lengthy 
report,  duly  published  by  the  Department  of  State,  in  which  he 
pleased  the  American  farmer  by  the  prophecy  that  owing  to  poor 
soil,  drought,  distance  and  lack  of  intelligent  labor,  the  River  Plate 
republics  could  never  become  factors  in  the  world's  wheat  market; 
could,  therefore,  never  seriously  compete  with  America's  staple 
export ! 

The  two  decades  since  the  Blaine  conference  have  brought  about 
the  displacement  of  Great  Britain,  and  the  predominance  of  the 
United  States  in  the  trade  of  ten  of  the  twenty  Latin  republics. 
Those  which  have  come  close  to  us,  including  two  which  did  not 
exist  at  the  conference  of  1890,  have  a  population  altogether  of 
some  twenty-two  millions.  Those  which  remain  aloof  have  a  popu- 
lation of  double  the  first  ten,  approaching  forty-four  millions,  and 
an  area  many  times  as  large,  a  production  and  total  trade  enor- 
mously greater.    A  brief  survey  of  the  conditions  which  have  linked 

(641) 


64  The  Annals  of  the  American  Academy 

us  with  the  first  ten,  and  of  those  which  have  held  the  greater 
ten  to  their  earlier  relations,  may  assist  us  to  estimate  what  may  be 
our  progress  during  a  like  period  of  the  future. 

In  the  Antilles,  the  two  republics  occupying  the  ill-fated  His- 
paniola  of  Columbus  have  not  materially  changed  during  the  two 
decades.  Adverse  conditions,  discouraging  to  themselves  and  their 
neighbors,  have  kept  capital  away  from  Haiti  and  Santo  Domingo 
and  limited  commerce  to  necessities.  The  helping  hand  of  the 
Roosevelt  administration  has  insured  stability  to  the  Spanish-speak- 
ing republic,  and  similar  conditions  may  be  brought  about  in  the 
French-speaking  one.  The  prosperity  of  this  island  in  the  late 
colonial  period,  when  it  supplied  the  finest  mahogany  and  logwood 
to  the  world's  markets,  may  be  duplicated  and  greatly  extended  when 
railroads  bring  the  rich  valleys  of  the  interior  into  cheap  and  quick 
communication  with  the  coast,  opening  up  forest  areas  still  virgin, 
and  fruit-growing  areas  nearer  to  our  Atlantic  seaports  than  any 
of  the  present  areas  of  large  production.  Increased  export  duties, 
swelling  the  government  revenues  and  placing  money  in  general 
circulation,  will  raise  the  conditions  of  life  among  the  people  and 
increase  their  purchasing  power.  That  this  wall  be  the  work  of  the 
next  twenty  years  can  hardly  be  doubted ;  that  it  will  be  the  result 
of  the  investment  of  capital  attracted  from  the  United  States  rather 
than  England  is  as  certain  as  that  the  commercial  benefits  arising  will 
flow  principally  in  our  direction. 

In  the  greatest  of  the  Antilles,  the  republic  of  Cuba  has  made 
such  strides  that  the  figures  of  its  trade  in  the  days  of  Blaine  have 
no  appreciable  relation  to  those  of  the  current  year.  A  prosperous 
nation,  sure  of  its  economic  position,  and  dealing  confidently  with 
the  social  and  racial  problems  that  are  its  colonial  heritage,  has  sup- 
planted the  starving  and  desperate  colony  of  the  earlier  period. 
Investment  of  capital  in  its  railroads  and  highways,  under  the  stim- 
ulus of  a  great  citizen  of  Canada,  accommodation  readily  accorded 
for  the  improvement  and  extension  of  its  plantations  and  the  safe- 
guarding of  its  national  obligations,  have  all  brought  Havana  closer 
to  the  money  market  of  New  York  than  many  a  city  within  our 
own  boundaries. 

Coming  now  to  the  continent,  our  southern  neighbor,  Mexico, 
is  at  the  same  time  the  most  conspicuous  example  of  the  expansion  of 
mutual  commerce  and  of  the  investment  of  American  capital.     A 

(642) 


American  Capital  in  Latin-American  Countries  65 

generation  ago  the  seaport  of  Vera  Cruz  was  the  principal  gateway 
to  Mexico.  But  several  lines  of  railroad  linking  the  capital  with  our 
own  railroad  systems  have  been  constructed,  the  work  being  financed 
largely  from  this  country,  and  stocks  and  bonds  have  been  listed  on 
our  exchanges  like  those  of  any  home  enterprise.  The  effect  has 
been  to  change  the  direction  of  travel  and  trade,  so  that  the  Mexican 
district  is  a  part  of  the  field  regularly  covered  by  our  merchants  and 
manufacturers.  It  is  at  present  hard  to  realize  that  only  a  few  years 
ago  we  were  almost  strangers  to  this  near  neighbor,  when  we 
were  striving  to  prevent  her  from  falling  under  the  control  of  Euro- 
pean influences,  which  predominated  to  the  exclusion  of  our  own. 
The  flow  of  American  capital  into  Mexico  has  been  one  of  the  most 
notable  features  of  our  foreign  relations ;  the  exploitation  of  its  vast 
mineral  resources  has  had  the  first  place,  then  came  the  extension 
of  its  transportation  system,  the  development  of  its  local  transit 
and  lighting,  the  harnessing  of  its  watercourses  to  provide  power 
for  industrial  use,  and  even  experiments  in  plantations  under  cor- 
porate control.  The  effect  in  raising  the  general  level  of  prosperity, 
the  standard  of  life,  in  stimulating  local  education  and  enterprise, 
in  enlarging  the  purchasing  power  of  the  country  and  our  trade 
with  it,  can  hardly  be  calculated  in  figures.  Recent  uncertainties 
have  brought  out  the  statement  that  American  capital  is  invested  in 
Mexican  enterprises  to  the  extent  of  more  than  a  billion  of  dollars. 
Whatever  the  total  may  be,  the  result  is  evident.  Mexico  will  never 
again  appear  in  the  list  of  those  republics  whose  trade  is  predomi- 
nantly beyond  the  seas.  It  is  more  intimately  a  part  of  the  com- 
mercial system  of  the  United  States  than  if  it  were  actually  a  part 
of  our  body  politic.  And  the  change  has  been  brought  about  with- 
out detriment  to  the  interests  of  older  nations.  English  trade  with 
Mexico  has  increased,  so  have  English  investments.  Very  appro- 
priately the  greatest  enterprises  for  the  improvement  of  Mexican 
over-sea  commerce  have  been  under  English  guidance.  The  harbors 
of  Vera  Cruz  and  Tampico,  and,  even  to  a  more  conspicuous 
degree,  the  railroad  across  the  Isthmus  of  Tehuantepec  with  its 
modern  ocean  terminals,  which  brings  Hawaiian  sugar  to  New  York 
at  a  large  saving  in  the  cost  of  transportation,  and  built  up 
almost  over-night  one  of  the  busiest  lines  of  traffic  in  the  world,  are 
enduring  monuments  to  English  foresight. 

In  the  five  republics  of  Central  America  the  transformation 

(^M3) 


66  The  Annals  of  the  American  Academy 

has  been  less  rapid.  Suffering  like  the  other  tropical  republics 
from  the  economic  changes  coincident  with  the  modification  of  their 
monetary  standard,  there  are  yet  many  problems  of  social  and  politi- 
cal organization  which  have  tended  to  delay  their  enjoyment  of 
the  rich  resources  that  are  normally  theirs.  But  the  greatest  sources 
of  encouragement  have  been  those  following  the  development  of  fruit 
cultivation,  bringing  regular  steamer  communication  with  New 
Orleans,  Mobile,  Baltimore,  Philadelphia,  New  York  and  Boston. 
And  there  is  no  reason  to  doubt  that  American  capital  will  be 
employed,  as  soon  as  conditions  justify  the  venture,  in  the  much- 
needed  railway  extensions  that  will  link  their  rich  uplands  with  their 
natural  outlet  on  the  Caribbean,  and  so  end  the  comparative  isolation 
under  which  they  still  suffer.  In  the  republic  of  Costa  Rica  this 
work,  begun  under  English  capital,  and  extended  to  meet  the  needs 
of  fruit  plantations  in  which  Americans  and  Costa  Ricans  are 
interested,  has  furnished  very  nearly  the  system  of  communication 
needed. 

On  the  Isthmus  itself  conditions  are  peculiar  in  that  the  greatest 
demand  arises  from  the  needs  of  the  American  colony  engaged  on 
the  canal  work.  And  here  is,  of  course,  the  greatest  single  instance 
of  the  investment  of  American  capital  abroad  stimulating  the  inter- 
est felt  in  this  country  by  all  the  republics  south  of  the  canal,  and 
promising  great  changes  in  transportation  and  commerce  immedi- 
ately upon  its  completion,  which  wall  come  about  mainly  under  assist- 
ance from  this  country.  Guayaquil  and  Callao,  now  nearer  to  London 
and  Hamburg  by  sea  than  to  New  York,  will  be  brought  almost  to 
our  doors;  and  the  flow  of  capital,  which  has  been  most  marked  in 
recent  years  in  the  case  of  Peru,  may  conceivably  increase  until  our 
investments  attain  a  position  almost  if  not  quite  as  commanding 
as  in  Mexico.  Southern  Colombia,  Ecuador,  Peru  and  Bolivia  pos- 
sess latent  resources  of  which  the  United  States  stands  in  need, 
and  which  are  sure  to  be  developed  and  exploited  to  the  benefit  of 
those  countries  as  well  as  our  own.  Railroads  to  bring  the  ores 
down  to  the  sea,  and  to  reach  great  tracts  of  fertile  uplands  now  in- 
accessible to  trade  but  capable  of  raising  great  quantities  of  cacao, 
cotton,  rubber,  sugar  and  fruits,  wnll  stimulate  settlement,  industry 
and  commerce,  along  lines  which  will  point  toward  New  Orleans 
and  New  York  rather  than  the  ports  of  Europe.  The  west  coast 
is  singularly  rich  in  natural  resources,  but  lacking  in  population 

(644) 


American  Capital  in  Latin-American  Countries  67 

and  funds  for  developing  them.     In  this  work  the  participation  of 
American  capital  is  assured. 

There  remain  to  be  considered  the  more  powerful  and  advanced 
of  the  South  American  republics,  Chile,  the  River  Plate  countries 
and  Brazil.  Here  the  situation  is  altogether  different.  Mineral 
resources  are  known  and  worked,  railroads  are  built  as  the  traffic 
justifies,  agriculture  is  highly  developed,  busy  cities  have  grown  up, 
and  the  work  has  been  done  with  capital  supplied  from  England 
and  the  continent  of  Europe,  which  in  turn  take  the  greater  part  of 
the  resulting  product.  Here  in  the  most  prosperous  portion  of 
Latin-America  the  work  is  already  largely  done  which  we  are  begin- 
ning to  do  in  the  tropical  republics,  and  the  opportunities  for  invest- 
ment are  those  arising  in  a  developed  community  in  many  respects 
like  our  own,  instead  of  in  a  new  and  untried  field.  Yet  here  are  the 
greatest  accumulations  of  wealth,  the  greatest  interest  in  improve- 
ments of  all  kinds,  and  in  some  respects  the  greatest  need  for 
American  participation  if  our  relations  with  these  republics  are  ever 
to  gain  any  prominence.  And  in  these  countries  there  is  no 
American  bank,  no  systematic  study  of  the  many  opportunities  for 
American  investment,  and  but  a  meager  representation  of  American 
business  houses ;  while  Valparaiso,  Buenos  Aires  and  Rio  de  Janeiro 
are  full  of  just  such  outposts  of  progress  representing  all  our 
European  competitors,  watchful  over  the  needs  and  desires  of 
twenty-seven  millions  of  people. 

It  is  not  to  be  expected  that  the  United  States  will  ever  be  as 
intimately  concerned  in  the  development  of  Chile  and  Argentina 
as  England  and  Germany  have  made  themselves.  The  work  is 
already  too  far  advanced.  But  the  rapid  increase  of  wealth  in  those 
countries  is  constantly  leading  to  new  projects  affording  promise  of 
safe  and  substantial  returns ;  in  which  an  enlarged  interest  on  the 
part  of  American  capital  will  be  at  once  profitable  and  productive  of 
a  feeling  of  greater  cordiality  and  solidarity  on  the  part  of  these 
progressive  nations,  whose  co-operation  is  so  desirable  in  the  defense 
of  American  unity  and  progress.  The  influence  of  an  American 
investing  interest  in  these  southern  republics  would  be  mutually 
stimulating  and  beneficial. 

In  Brazil,  great  as  has  been  the  total  of  English  investment,  and 
advanced  as  the  work  of  development  has  become,  the  future  possi- 
bilities are  incalculable.    Within  an  area  greater  than  that  of  con- 

(645) 


68  Tile  Annals  of  the  American  Academy 

tincntal  United  States,  dwell  hardly  more  than  one-fifth  our  popu- 
lation, served  by  al)0ut  one-twentieth  our  railroad  mileage.  The 
improvement  and  growth  of  this  great  nation  will  be  one  of  the 
features  of  the  coming  century.  More  closely  bound  to  us  by  ties 
of  friendship  than  most  of  the  South  American  republics,  sending  us 
the  major  part  of  her  greatest  staples,  the  possibilities  of  co-opera- 
tion are  enormous.  The  very  fact  of  the  extent  of  the  present 
investment  of  European  countries  will  tend  to  turn  Brazilian  leaders 
toward  seeking  a  larger  share  of  help  from  the  United  States.  And 
every  increase  in  such  accommodation  will  be  reflected,  inevitably, 
by  an  increase  in  the  exchange  of  goods  between  the  two  countries. 
Trade  is  no  matter  of  sentiment,  and  other  things  being  equal,  a 
nation  buys  where  it  can  get  the  best  terms. 

In  the  earlier  days  of  foreign  investment  in  Latin-America,  con- 
cessions were  sought  and  granted  which  were  too  sweeping  to  be 
capable  of  execution  by  either  side.  Venal  cabinets  and  congresses 
were  induced  to  vote  rights  which  their  successors  found  it  politi- 
cally profitable  to  repeal,  leading  to  bitter  disputes  and  international 
complications ;  conditions  were  smuggled  into  such  grants  which  pro- 
vided for  large  advance  payments  to  the  grantor,  with  strong 
probability  that  the  task  v^^ould  prove  beyond  the  power  of  the 
grantee,  and  that  a  new  proposal  might  be  invited  after  a  short  inter- 
val ;  wdiile  on  the  other  hand  rights  almost  involving  national  sov- 
ereignty and  honor  were  sought  and  obtained  under  various  forms 
of  persuasion  by  persons  of  no  responsibility.  Such  grants  would 
become  the  basis  of  unscrupulous  speculation  and  of  clamorous 
appeals  to  the  national  government  to  intervene  for  the  protection 
of  privileges  which  they  would  never  have  dreamt  of  granting  within 
their  own  borders,  even  to  their  own  citizens.  The  passing  of  such 
adventurers  is  most  fortunate.  The  lesson  must  be  learned  that  to 
avoid  jealousy  and  distrust  of  the  foreigner,  the  native  citizen  must 
at  least  be  ofifered  a  visible  benefit  arising  from  the  right  he  grants, 
and  in  some  definite  proportion  to  the  profits  accruing.  There  should 
be  no  more  reason  for  diplomatic  complications  to  arise  from  an  in- 
vestment in  a  railroad  through  a  tropical  country  than  from  one  in 
connection^ with  a  reservoir  for  a  large  city  in  our  own  country. 
Mutual  confidence  and  benefit  should  govern  all  such  enterprises. 
Greed  and  exclusiveness,  arrogance  and  supercilious  disregard  of 
native  rights  are  responsible  for  the  distrust  of  the  "gringo."     The 

(646) 


American  Capital  in  Latin-American  Countries  69 

native  sensitiveness  of  our  Latin  neighbors,  directly  responsive  to 
the  appeal  of  sympathy  and  consideration,  should  be  made  a  sure 
support  in  extending  our  relations  with  them. 

From  national  policy  and  natural  position,  American  capital 
may  be  expected  to  claim  its  share  in  the  development  of  the  new 
world,  rather  than  to  seek  returns  in  more  distant  lands,  where 
others  will  have  greater  interest  and  concern.  It  is  through  such 
influences  that  the  broad  principle  of  solidarity  which  inspired  the 
Monroe  Doctrine  may  be  soonest  and  most  surely  realized. 


(647) 


COMMERCE  WITH  SOUTH  AMERICA^ 


Our  trade  relations  with  South  America  have  latterly  again 
become  a  popular  subject  and  the  newspapers  present  daily  articles 
on  "our  neglected  opportunities"  there.  The  average  reader  is  led 
to  believe  that  all  South  America  is  still  a  virgin  field  for  the  Amer- 
ican merchant  and  manufacturer,  that  the  trade  has  been  idly  aban- 
doned to  our  European  rivals,  that  we  should  really  now  go  in  and 
take  the  lion's  share  of  the  business,  which  is  to  be  had  for  little  more 
than  the  asking,  and  that  the  peoples  of  our  southern  continent  are 
really  only  just  waiting  for  us  to  discover  them  and  supply  all  their 
needs.  The  press  tells  us  that  these  neighbors  are  eager  for  Amer- 
ican goods,  in  preference  to  all  others,  but  do  not  know  how  to 
get  our  articles. 

Then  there  are  those  who  write  a  book  hastily  to  inform  us 
authoritatively  on  the  situation.  Their  hearsay  facts  are  generally 
more  worthy  of  the  fiction  shelf  than  of  being  spread  broadcast  as 
verities. 

Some  misleading  reports  have  been  prepared  by  men  commis- 
sioned to  submit  carefully  ascertained  facts.  A  hasty  trip  through 
a  country  can  yield  but  superficial  knowledge  and  casual  evidence, 
yet  information  so  obtained  is  freely  set  forth  as  authentic,  often 
to  the  intense  astonishment  of  those  who  have  long  resided  in  the 
country  which  is  made  the  subject  of  report.  There  are  also  many 
self-constituted  authorities,  who  print  or  speak  similar  vagaries.  So 
recently  as  February  there  was  published  an  address  in  which  it  was 
implied  that  goods  for  Buenos  Aires  must  still  be  shipped  via 
England!  Also  that  Callao  (Peru)  is  "an  exposed  open  roadstead 
where  ships  must  anchor  off  the  surf  and  unload  into  barges  tossing 
and  heaving  on  a  rolling  swell,"  the  truth  being  that  it  is  a  fine 
harbor,  with  magnificent  stone  docks,  within  which  a  large  fleet  of 
vessels  may  enjoy  all  modern  facilities  for  discharge  direct  to  rail- 
way cars.  Indeed,  Callao  is  by  far  the  best  equipped  port  on  all 
that  coast.  It  was  also  stated  as  a  fact  that  "the  business  integrity 
of  the  Spanish-American  is  so  high  that  he  very  seldom  fails  to 

'  It  is  tho  froneral  polioy  of  tlip  Academy  not  to  publish  anonymous  articles, 
but  there  are  special  reasons  In  the  case  of  this  article  for  complying  with  the 
wish  of  the  author. 

(648) 


Commerce  zvith  South  America  71 

pay."    And  yet  the  author  of  the  article  referred  to  poses  as  having 
traveled  intelligently  throughout  South  America. 

Again,  we  constantly  read  reports  from  the  United  States  con- 
suls, chiding  us  for  our  neglect  of  those  markets,  where  golden  oppor- 
tunities cry  out  to  us  and  yet  pass  unheeded.  We  are  charged  with 
indifference  to  trade  of  all  sorts,  trade  that  is  immensely  profitable, 
trade  that  is  workable  on  wholly  safe  lines.  Consuls  are  not  situated 
to  fully  appreciate  the  financial  and  other  manifold  responsibilities 
which  underlie  many  of  the  undertakings  that,  to  them,  may  seem 
just  like  out-and-out  business  propositions;  yet  these,  upon  closer 
inspection,  often  turn  out  to  be  either  impracticable,  or  else  lack 
the  necessary  funds  to  carry  them  through. 

So  consular  reports  should  not  be  taken  as  the  forerunner  of 
trade,  nor  the  creator  of  trade.  They  are  likely  to  deal  more  accu- 
rately with  what  has  already  taken  place,  or  be  reviews  on  the  gen- 
eral situation,  or  else  afford  statistical  information.  This  statement 
refers  to  consular  reports  generally,  not  alone  those  from  our  own 
representatives.  The  consul  cannot  be  expected  to  enjoy  the  inner 
confidences  of  the  local  business  man,  nor  be  hourly  informed  on 
commercial  and  financial  movements. 

It  is  a  mistake  to  regard  South  America  collectively,  for  no  two 
of  the  fourteen  countries  have  the  same  currency,  and  they  vary 
widely  as  to  climatic  and  other  conditions.  Some  have  large 
expanses  of  plain,  while  others  are  principally  mountainous,  ranging 
up  to  plateaus  of  12,000  feet;  and  instances  where  we  find  their 
most  important  towns  at  altitudes  of  7.000  to  13,000  feet  are 
numerous.  Here  at  home  we  pay  due  regard  to  the  fact  that  condi- 
tions in  Arizona  are  radically  different  from  those  of  Maine  and  that 
the  Dakotas  do  not  want  just  the  same  goods  as  are  required  by 
Florida. 

Again,  distances  in  those  countries  are  great,  and  forms  of 
transportation  are  varied ;  but,  for  the  major  part,  cart-roads  are 
still  of  the  primitive  sort  and  in  many  places  even  these  are  almost 
impassable.  Except  for  the  southerly  part  of  the  continent,  there 
is  as  yet  no  great  railway  development. 

Then,  except  for  a  few  favored  harbors,  which  are  almost 
wholly  on  the  Atlantic  side,  the  so-called  "ports"  are  little  better  than 

(649) 


72  The  .-linials  of  the  American  Academy 

open  roadsteads  in  many  of  which  the  ship  is  really  at  anchor  on 
the  high  sea.  This  subjects  her  to  the  ocean  swell  which,  especially 
on  the  Pacific  coast,  causes  such  heavy  movement  that,  even  in 
normal  times,  the  uninitiated  observer  may  well  wonder  how  the 
handling  of  cargoes  is  at  all  possible.  When  the  long  swell  sets  in 
heavily,  at  certain  seasons  of  the  year,  the  careen  of  the  vessel  is 
almost  like  that  of  a  log  and  it  is  only  with  consummate  skill  that 
ihe  native  laborers  can  handle  the  lighters  bobbing  wildly  alongside. 

Each  of  these  countries  must  be  considered  separately,  but 
cannot  be  treated  in  extenso  in  such  a  paper  as  this.  With  special 
reference  to  the  Pacific  side,  we  find  that : 

Chile  is  unique  in  conformation,  having  nearly  3,000  miles  of 
sea  coast  and  a  back  country  which  averages  only  about  100  miles 
in  width.  W^alled  in  physically  by  the  lofty  Andes,  it  must  ever  be 
regarded  as  a  country  of  only  north-and-south,  and  so  must  be 
served  through  its  innumerable  ports  rather  than  from  any  land 
center.  With  a  population  of  about  3,500,000  people,  it  is  a  wonder- 
fully large  consumer  of  foreign  articles.  It  may  be  roughly  divided 
into  three  zones :  the  southern,  embracing  the  old  Patagonian  terri- 
tory on  the  Straits  of  Magellan,  and  the  long  strip  of  wet,  desolate 
and  almost  uninhabited  country  up  to  the  latitude  of  Puerto  Montt ; 
the  central  zone,  from  Puerto  IMontt  to  Coquimbo,  is  the  really 
developed  section  of  Chile,  being  rich  in  agricultural  and  pastoral 
pursuits,  and  blest  with  a  beneficent  climate.  Irrigation  is  carried 
out  very  thoroughly ;  from  Coquimbo  to  Arica,  constituting  what 
we  may  call  the  northern  zone,  is  practically  all  arid  country,  but 
rich  in  mineral  resources,  and  contains  the  only  commercial  supply 
of  nitrate  of  soda,  of  which  very  important  article  about  2,500,000 
tons  is  now  annually  exported  to  all  parts  of  the  world. 

Bolivia  lost  her  seacoast  when  warring  with  Chile,  thirty  years 
ago,  so  it  is  now  an  inland  nation.  The  population  is  estimated  from 
1,500,000  to  2,000,000  but  consists  so  largely  of  Indians,  and  mostly 
in  such  remote  regions,  that  no  reliable  census  is  possible.  The 
country's  principal  cities  ^re  on  the  high  plateaus  of  the  Andes,  at 
great  altitudes.  This  is  the  only  region  of  much  development,  and 
railway  construction  there  is  now  active.  It  is  very  rich  in  silver, 
copper  and  tin,  and  holds  out  prospect  of  great  mining  operations 
in  the  future.     The  production  of  tin  has  been  rapidly  increasing 

(650) 


Commerce  with  South  America  y^ 

and  Bolivia  promises  to  become  the  chief  source  of  supply  for  the 
world.  The  easterly  part  of  the  country,  on  the  tributaries  of  the 
Amazon  and  other  great  interior  rivers,  is  practically  inaccessible 
from  the  Pacific  and  its  only  development  has  been  in  the  rubber 
districts. 

Peru  offers  the  combination  of  a  long  seacoast,  to  which  many 
fertile  valleys  are  tributary ;  and  her  immense  regions  on  the  east- 
erly slope  of  the  Andes  will  undoubtedly  undergo  great  develop- 
ments, as  the  means  of  communication  with  the  interior  are  gradu- 
ally opened  up.  The  population  is  roughly  estimated  as  somewhere 
between  2,000,000  and  2,500,000,  including  the  remote  native  tribes. 
Her  great  sugar  estates  are  all  under  irrigation,  and  the  cutting  of 
the  cane  is  carried  on  through  practically  each  month  of  the  year, 
while  most  other  sugar  countries  are  limited  to  a  short  harvesting 
season.  In  mining  wealth,  she  is  proverbial.  And  she  produces  a 
peculiar  long-stapled-rough  cotton  not  to  be  had  elsewhere. 

Ecuador  is  essentially  a  tropical  country  and  still  in  the  very 
early  stages  of  development.  The  population  is  difficult  to  estimate, 
but  is  probably  about  1,500,000,  mostly  of  the  Indian  race.  Her 
products  are  principally  of  the  tropical  sort,  with  cocoa  in  the  lead. 
The  trans-andean  region  is  little  known,  but  offers  much  for  the 
future. 

These  countries  of  the  Pacific  slope  offer  many  mountain 
streams  suitable  for  electrical  power  purposes,  but  there  is  a  lack  of 
markets  for  the  power  so  obtained.  In  most  cases  the  necessary 
money  investment  could  not  find  sufficient  consumers  to  support  it. 
The  notable  exceptions  are  Santiago  (in  Chile)  and  Lima  (in  Peru). 
The  latter  has,  under  American  auspices,  undergone  a  development, 
for  trolley  and  industrial  purposes,  which  has  no  equal  in  all  South 
America. 

Each  country  has  its  industrial  enterprises,  according  to  local 
conditions,  but,  along  the  west  coast,  Chile  has  by  much  the  lead  in 
its  variety  of  manufactures,  although  Peru  is  decidedly  to  the  front 
in  the  making  of  coarse  cotton  goods.  Railway  and  mining  develop- 
ments are  really  the  great  hopes  of  nearly  all  that  part  of  the  coast 
to  the  north  of  central  Chile. 

It  is  already  a  threadbare  platitude  that  "the  trade  follows  the 
flag,"  in  so  far  as  dealing  with  foreign  markets  is  concerned;  and, 

(651) 


74  The  Annals  of  the  American  Academy 

in  parallel,  is  the  rather  wearisome  chant  by  certain  interests,  and 
by  unthinking  persons  who  join  in  the  chorus,  that  our  commerce 
with  South  America  languishes  simply  because  we  absolutely  lack 
frequent  and  cheap  communication. 

It  is  frequently  asserted,  sometimes  by  those  who  should  know 
better,  that  we  cannot  ship  goods  to  distant  ports  of  South  America, 
unless  via  Europe  for  trans-shipment  thence  by  the  numerous  lines 
plying  to  all  parts.  The  misleading  and  even  untruthful  nature  of 
such  statements  is  shown  when  we  consider  the  facts.  Taking  the 
calendar  year  1910,  it  will  be  found  that  from  the  port  of  New  York 
alone,  steamers  were  despatched  as  follows : 

Regular       Monthly  Annual 

For  lines.  sailings.  sailings. 

Brazilian "  ports    5  8  to  12        about  125 

River   Plate  ports    6        10  to  12        about  125 

Chilean  and   Peruvian  ports,  via  Magellan 3  3  to     4        about    40 

So  it  will  be  seen  that  the  trade  is  not  hampered  by  infrequency 
of  sailings,  and  the  various  companies  operating  these  great  fleets 
are  all  only  too  ready  to  still  further  increase  their  tonnage,  to  satisfy 
any  temporary  or  permanent  demand.  In  fact,  having  regard  for  the 
volume  of  cargo  available,  these  countries  are  already  relatively 
as  well  served  from  New  York  as  are  the  principal  ports  of  Europe 
and  Asia. 

Nearly  all  the  boats  for  Brazil,  as  well  as  those  for  the  River 
Plate,  accommodate  passengers,  and  some  of  the  lines  operate  excel- 
lent passenger  boats  on  good  schedule  time.  So  it  is.  no  longer 
necessary  to  travel  via  Europe,  except  for  those  travelers  who  wish 
to  spend  more  time  and  more  money,  because  they  like  to  take  in 
the  pleasures  of  London  and  Paris  en  route.  In  addition,  many 
steamers  and  sailing  vessels  were  loaded  from  our  South  Atlantic 
and  Gulf  ports,  carrying  principally  whole  cargoes  of  lumber,  rails, 
refined  petroleum,  etc.,  etc. 

Between  our  own  Pacific  coast  and  the  countries  on  the  South 
Pacific,  there  is  also  a  considerable  trade,  but  it  is  mostly  in  lumber 
from  Washington,  Oregon  and  California,  although  considerable 
flour  is  shipped,  as  also  a  limited  amount  of  canned  goods  and 
miscellaneous  wares. 

There  are  two  steamship  lines  regularly  in  this  trade,  and 
numerous  sailing  vessels  are  chartered  to  carry  cargoes  of  lumber. 

(652) 


Couiincrce  zi.'ith  South  America  75 

In  addition  there  is  an  American  line  of  steamers  covering  the 
various  ports  from  San  Francisco  to  Panama,  which  also  carries 
passengers  and  cargo  for  trans-shipment  southward  at  Panama. 

The  west  coast  is  also  served  by  the  Panama  route.  There  are 
four  regular  steamship  lines  from  New  York,  and  a  couple  from 
the  Gulf,  which  make  the  connection  at  Colon.  This  route  naturally 
takes  the  passengers,  mails,  and  high-class  cargo,  not  only  from  the 
United  States  but  also  from  Europe. 

From  Panama  southward  there  are  two  very  excellent  passenger 
and  cargo  lines,  one  English  and  the  other  Chilean,  with  sailings 
to  make  a  weekly  average ;  these  include  a  fast  fortnightly  express 
service,  covering  the  principal  ports  between  Panama  and  Valpa- 
raiso in  fourteen  days.  So  it  is  possible  to  make  the  journey  from 
New  York  to  Valparaiso  in  twenty  to  twenty-one  days. 

In  1909,  with  the  support  of  the  government,  a  Peruvian  line 
inaugurated  a  fast  fortnightly  service  between  Panama  and  ports 
of  Peru.  Two  fine  new  passenger  boats  were  put  on  but  misfortunes 
soon  led  to  a  suspension  of  operations.  This  company,  however, 
has  now  resumed  its  service,  and  with  the  building  of  additional 
steamers  contemplates  extending  the  voyages  to  Chile. 

The  matter  of  freight  rates  is  another  bugaboo  which  is  con- 
stantly emphasized,  to  impress  the  American  trader  that  we  are 
sadly  handicapped  in  that  respect.  The  truth  is  that  we  pay  ocean 
rates  which,  while  averaging  about  the  same  as  those  from  Europe 
to  South  America,  are  frequently  even  lower.  By  way  of  illus- 
tration, we  have  examples  of  rates  current  during  the  last  year,  on 
low  class  goods,  as  follows: 

To    Brazilian    ports Voyages  of  4,000  to   5,000  miles,  15  to  i8c  per  100  lbs. 

To   River    Plate   ports Voyages  of  6,000  to    7,000  miles,  16  to  20c  per  100  lbs. 

To    Chilean    ports Voyages  of  8,000  to   9,000  miles,  20  to  25c  per  100  lbs. 

To    Peruvian    ports Voyages  of  9,000  to  10,000  miles,  22  to  250  per  100  lbs. 

in  contrast  with  which  graphic  array  we  have  examples  of  nearby 
rates  on  similar  goods,  such  as : 

Pittsburg  to  New  York,  by  rail about  450  miles,  10^  cents. 

New  York  to  Charleston,  S.  C,  by  sea about  625  miles,  15      cents. 

New  York  to  Savannah,  Ga.,  by  sea about  800  miles,  15      cents. 

New  York  to  Cuban  ports,  by  sea 1,000  to  1,300  miles,  15      cents. 

(653) 


^6  The  Annals  of  the  American  Academy 

From  this  exhibit  it  must  be  seen  that  there  is  no  lack  of  ade- 
quate transportation  faciHties  to  South  America,  nor  that  exorbi- 
tant rates  prevail.  And  it  is  all  done  without  ship-subsidy,  except 
that  enjoyed  by  one  line  under  the  Brazilian  flag. 

Quite  recently  a  large  manufacturer  of  automobiles,  in  either 
Michigan  or  Wisconsin,  publicly  stated  that  he  was  doing  a  very 
nice  business  with  the  Argentine ;  and,  when  asked  whether  shipping 
charges  were  not  an  impediment,  he  frankly  stated  that  he  was 
entirely  satisfied,  as  it  cost  him  only  $85.00  per  car  from  his  factory 
to  Buenos  Aires,  whereas  the  freight  on  a  similar  car  from  his 
factory  to  San  Francisco  cost  him  $125.00. 

Much  clamor  is  made  because  there  are  no  strictly  American 
banks  in  South  America,  and  because  for  lack  of  same,  we  cannot 
foster  our  trade.  There  is  nothing  to  hinder  our  capitalists  from 
going  there,  if  they  wish  to  do  so,  and  their  money  would  be  more 
than  welcomed.  But  they  find  no  special  inducement  in  prospective 
profits  compared  with  more  comfortably  employing  their  funds 
at  home. 

There  are  numerous  first-class  British  banks  in  all  the  principal 
southern  countries  that  afford  all  manner  of  facilities  and  do  not 
abuse  the  confidences  of  their  customers.  Most  of  these  have  their 
own  agencies  in  New  York. 

The  German  banks  are  aggressive  for  a  big  share  of  this  busi- 
ness, but  do  not  limit  themselves  to  purely  financial  functions,  for 
they  also  invade  the  commercial  field  and  go  out  of  their  way  to 
secure  contracts — for  local  industrial  enterprises  for  the  German 
manufacturer,  all  a  part  of  the  admirable  system  of  the  Germans 
for  Germany  forever. 

The  French,  Italian  and  Spanish  institutions  are  also  important 
factors,  more  particularly  in  east  coast  banking.  And  all  the  South 
American  countries  have  native  banks,  ranging  from  purely  local 
concerns  up  to  powerful  institutions  that  figure  largely  in 
international  finance. 

The  advent  of  American  banks  would  add  nothing  in  facilities, 
or  cheapness,  to  what  is  already  enjoyed.  Europe  buys  the  great 
bulk  of  South  American  produce,  also  furnishes  the  necessary 
capital  for  both  public  and  industrial  developments,  on  terms  not 
yet  likely  to  tempt  the  American  investor.      So  London,  Paris  and 

(6S4) 


Commerce  ivith  South  America  jy 

Berlin  will  probably  remain  the  international  clearing  houses  for 
a  long  time  to  come. 

There  is  already  a  large  American  banking  corporation,  organ- 
ized particularly  for  Asiatic,  Philippine  and  Panama  business,  which 
cannot  finish  up  its  business  in  New  York,  and  is  compelled  to  use 
London  as  its  settling  center. 

There  are  a  great  many  banks  and  private  bankers  in  New  York, 
as  well  as  other  American  cities,  only  too  ready  to  serve  the  repu- 
table South  American  trader  by  discounting  his  drafts  at  six  per 
cent  per  annum,  plus  a  charge  for  collections  which  will  vary  from 
one-eighth  per  cent  to  one  per  cent  depending  upon  the  remoteness 
of  the  collection  point.  And  with  the  pound  sterling  as  his  settling 
medium,  he  does  not  really  suffer  a  loss  in  financing,  for  his  bills 
are  freely  negotiable,  at  the  current  rates  on  London,  which  rates 
are  subject  to  a  very  keen  competition  upon  the  enormous  New 
York  exchange  market. 

There  is  no  doubt  that  the  introduction  of  special  lines  of  goods 
is  greatly  assisted  by  the  special  salesman,  and  his  mission  is  helpful 
to  all  concerned.  But  there  are  few  American  commercial  travelers 
who  go  out  fully  qualified  for  their  missions. 

The  novice  starts  bolstered  with  the  American  idea  of  "get  there 
somehow,"  and  has  his  conceit  of  vanquishing  the  field  easily.  He 
has  no  respect  for  well-established  conditions,  and  his  rough  effort 
to  override  these  frequently  results  in  his  undoing.  Seldom  is  he 
fluent  in  Spanish  and  rarely  is  he  tolerant  of  customs  quite  strange 
to  his  habits  of  life.  In  contrast,  the  commercial  men  from  Europe 
are  patient  and  indulgent,  for  they  do  not  expect  to  carry  all 
before  them. 

In  the  South  American  countries,  principally  for  the  purpose  to 
provide  municipal  revenue,  it  is  customary  to  license  all  lines  of 
business  and  professions,  whether  banks,  doctors,  traders  or  lawyers, 
according  to  a  graduated  schedule.  So  it  is  natural  that  the  local 
tradesman,  whether  wholesale  or  retail,  quite  openly  resents  the 
invasion  of  his  field  of  itinerant  salesmen  who  do  not  carry  the 
burden  of  fixed  expenses.  In  some  parts  the  result  is  a  town  tax 
levied  upon  all  visiting  salesmen,  and  woe  to  him  who  tries  to  elude 
this  fee,  for  if  not  betrayed  by  his  prospective  customers,  he  will 
likely  find  that  his  innkeeper  has  privately  reported  him  to  the  tax 

(655) 


78  The  Annals  of  the  American  Academy 

collector,  with  whom  he  is  in  collusion  for  a  share  of  the  heavy  fine 
then  imposed. 

Although  the  assertion  is  frequently  made  that  w^e  do  not  look 
for  South  American  trade,  the  fact  remains  that  every  commercial 
center,  in  all  that  continent,  down  to  towns  of  the  sixth  and  seventh 
degree  in  importance,  is  constantly  visited  by  American  travelers, 
and  also  drummed  incessantly  by  local  salesmen,  who  are  either 
Americans,  or  so  closely  represent  American  merchants  and  manu- 
facturers, that  full  justice  is  done  to  such  trade  as  far  as  it  is 
possible  under  ever-changing-  conditions. 

The  struggle  to  transact  the  largest  possible  business  is  very 
keen  indeed,  and  it  is  so  all  along  the  line.  The  competition  is  so 
close  in  many  cases  that  the  margin  of  profit  reaches  practically 
the  vanishing  point.  American  articles  are  prominent  in  this 
mercantile  effort. 

Here  in  our  domestic  trade  the  merchant,  jobber,  or  manufac- 
turer would  often  refuse  to  do  business  on  the  slender  margin 
that  the  South  American  importer  must  constantly  accept,  in  trans- 
actions of  any  magnitude,  in  competition  wnth  his  British,  German 
and  other  European  rivals.  Moreover,  the  merchant  there  has 
usually  to  extend  terms  of  credit  that  w^ould  not  be  conceded  here, 
and  in  some  countries  he  is  hazardously  exposed  to  fluctuations  in 
the  values  of  the  currency,  much  more  violent  than  was  the  case  of 
our  owm  paper  money  in  Civil  War  times.  The  resident  South 
American  merchant  has  by  no  means  the  indolent  and  prosperous 
life  so  often  pictured  of  him. 

We  have  been  so  fully  engaged  in  opening  up  and  developing 
our  own  vast  country,  under  very  profitable  financial  and  mercantile 
conditions,  that  the  inducement  to  put  money  into  foreign  countries, 
especially  those  to  the  south  of  us,  was  not  tempting,  compared  with 
returns  equally  good  and  usually  much  safer  to  be  found  in 
our  home  markets.  But  latterly  we  have  reached  such  a  condition 
of  industrial  development,  even  in  times  of  normal  demand  at  home, 
that  we  have  a  surplus  of  manufactured  goods,  which  more  than 
ever  forces  us  to  seek  sales  in  the  foreign  markets,  and  South 
America  is  now  paraded  as  a  new  field  for  enterprise. 

There  is  nothing  mysterious  about  this  export  trade,  but  our 

(656) 


Commerce  zvith  Soutli  America  79 

manufacturers  must  realize  that  more  care  is  required,  and  that 
they  must  feel  some  larger  responsibility,  of  at  least  a  moral  sort, 
than  in  our  domestic  sales.  It  should  not  be  imagined  that  the  cus- 
tomer at  the  other  end  has  any  respect  or  sentiment  for  the  national 
origin  of  the  goods  he  is  prepared  to  buy.  The  consumer  is  the 
ordinary  human  being  and  struggles  to  get  the  best  value  for  his 
money,  without  a  care  whether  the  article  is  of  American  or 
European  make,  so  long  as  price,  equality  and  style  are  suitable. 

The  proper  packing  of  goods  is  certainly  an  important  matter. 
It  often  happens  that  our  factory  people  feel  that  almost  anything 
is  "good  enough  for  those  people  down  there,"  in  which  spirit  the 
packing-room  and  shipping-room  get  rid  of  their  work  in  the  con- 
fidence that  the  goods  are  going  so  far  away  that  any  negligence 
can  scarcely  be  brought  home  to  the  guilty  parties.  In  our  home 
trade,  where  freight  is  all  charged  on  the  weight,  there  is  always 
an  effort  to  reduce  the  gross  weight  of  goods  to  a  minimum  ;  so  boxes 
and  other  containers  are  made  cheap,  thin  and  light,  to  the  limit  of 
shipping  condition  tolerated  by  the  railroad  or  steamboat. 

Just  here  comes  in  the  great  difficulty  of  getting  the  American 
manufacturer  to  have  his  packing  room  distinguish  intelligently 
between  the  preparation  of  goods  for  domestic  trade  and  those 
intended  for  the  foreign  market.  Ocean  rates,  except  on  dead-weight 
goods,  are  charged  on  the  cubic  measurement.  Fragile  packages, 
put  up  without  regard  for  their  bulkiness  or  their  many  rough 
handlings  en  route  to  destination  are  unsuitable  for  export.  Fre- 
quently second-hand  boxes  are  used  and  reach  the  steamer  in  such 
wretched  condition  that  no  carrier  could  be  expected  to  sign  for  them 
as  being  "in  apparent  good  order,"  and  these  often  bear  old  shipping 
marks  which  cause  confusion  at  all  points  of  re-tally,  and  then 
difficulty  in  the  South  American  custom  house,  to  distinguish  which 
mark  is  really  intended. 

It  is  notorious  that  such  articles  as  boots  and  shoes,  patent 
medicines,  perfumeries,  fancy  soaps,  etc.,  etc.,  are  always  liable  to 
robberies  en  route,  whether  before  or  after  reaching  the  steamer, 
so  the  packages  should  not  have  their  contents  "advertised"  on  the 
outside,  as  this  is  a  standing  invitation  to  loot  them. 

Most  American  manufacturers  do  not  charge  openly  for  pack- 
ing, but  it  is  in  their  prices  all  the  same.     Far  better  to  pack  well 

(657) 


8o  The  Annals  of  the  American  Academy 

and  charge  frankly  for  it.  The  European  manufacturer  has  the 
reputation  of  good  export  packing,  and  charges  for  it,  often  quite 
heavily,  but  he  always  provides  new  packages.  So  we  should  pack 
properly,  under  reasonable  charges,  and  try  to  give  our  foreign  cus- 
tomers satisfaction.  They  would  much  prefer  to  get  their  goods 
in  sound  condition  and  on  time.  Claims  for  breakage  or  damage, 
arising  from  careless  packing,  are  usually  disputed  and,  anyhow, 
are  disagreeable  for  all  concerned. 

As  a  final  word  on  this  subject,  however,  it  is  but  just  to  state 
that  a  general  complaint  against  the  American  manufacturers  for 
bad  export  packing  is  undeserved ;  it  is  the  few  careless  ones  that 
cause  the  trouble.  The  British  factory  is  often  at  fault  for  too  dear 
and  over-heavy  packing,  the  latter  a  serious  thing  where  import 
duties  are  assessed  on  the  gross  weights. 

We  hear  criticism  of  the  rough  finish  of  our  machinery, 
whereof  it  is  contended  that  nothing  is  added  to  the  utility,  or 
wearing  qualities  of  the  machine,  by  fine  finish  of  the  invisible  and 
non-working  surfaces.  It  is  a  common  practice  to  use  a  filler,  for 
smoothing-out  the  rough  parts  of  castings,  and  all  is  then  nicely 
painted  over,  so  that  the  machine  may  have  a  pleasing  appearance 
to  the  customer.  Sometimes  before  and  sometimes  after  sale,  this 
filling  material  drops  ofif  and  leaves  such  a  scarred  looking  machine 
that  the  customer  considers  he  has  been  deceived  and  forms  a  new 
prejudice  against  American  machinery. 

The  latest  complete  annual  statistics  on  our  trade  movement  are 
for  the  year  1909,  and  show  up  for  the  principal  countries  as  follows : 

Exports.  Imports. 

Ecuador   $2,397,995  $3,416,146 

Peru    5,923,340  6,835,530 

Bolivia   4,349,412"  Negligible 

Chile     9,601,084  19,649,707 

Argentine    Republic 43,068,829  26,066,790 

Brazil     22,265,534  123,817,298 

in  which  our  sales  consist  of  all  sorts  of  goods,  implements,  and 
machinery ;  while  our  purchases  were 

From  Ecuador,  principally  cocoa  and  rubber. 
From  Peru,  principally  copper-produce,  cotton  and  alpaca  wool. 
•This  Is  a  palpable  error,  for  $1,500,000  is  nearer  the  {'\ct. 

(658) 


Commerce  zvith  South  America  8i 

From  Bolivia,  practically  nothing. 

From  Chile,  mostly  nitrate  of  soda,  the  balance  mainly  copper 
produce,  and  ores.  The  world's  supply  of  nitrate  of  soda  is  abso- 
lutely monopolized  by  Chile,  which  article  accounts  for  our  com- 
paratively large  importation  from  that  country.  We  must  have  it,  so 
Chile  owes  us  no  special  favor  because  we  have  to  buy  it  of  her. 
Leaving  this  article  aside,  she  purchases  from  us  about  $5.00  of  our 
goods  to  our  $1.00  of  her  products. 

The  Argentine  Republic  is  another  example  of  our  great  lead 
in  sales,  compared  with  our  purchases;  and  the  figures  for  1910  will 
prove  not  only  much  further  growth  but  a  still  larger  share  in  our 
favor. 

In  Brazil  the  trade  balance  is  against  us,  simply  because  of  our 
unavoidably  enormous  purchases  of  her  cofifee  and  rubber. 

With  the  nearer  countries  of  South  and  Central  America,  we 
enjoy  such  a  preponderance  of  trade  that  we  have  no  reason  for 
complaint. 

The  foreign  buying  power  of  the  several  countries  is  a  useful 
index  to  their  trading  possibilities.  Taking  up  the  official  statistics 
and  also  the  estimated  populations,  we-  can  arrive  at  a  per  capita 
capacity,  such  as  shown  by  the  following: — 

Total  importation     Estimated  Imports 

Country  for  the  year  1909.    population.        per  capita. 

Ecuador    $9,350,000  1,500,000  $6.23 

Peru    26,000,000  2,250,000  1 1.55 

Bolivia    14,775,000  1,750,000  8.44 

Chile    94,350,000  3,500,000  26.96 

Argentine     302,750,000  7,000,000  43.25 

Brazil    179,700,000  21,000,000  8.56 

It  cannot  be  pretended  that  such  a  table  is  authentic ;  but  even 
approximate  figures  permit  us  to  approach  the  facts.  Those  figures 
in  the  case  of  Argentine,  which  is  passing  through  a  period  of  great 
prosperity,  are  plausible.  In  Chile  the  people  spend  freely  and  are 
proverbially  improvident.  The  other  countries  have  not  so  much 
spending  power.    The  tabulation,  altogether,  is  fairly  illustrative. 

In  all  this  trade,  the  exporting  merchant  is  a  very  important 
factor,  whether  buying  for  his  own  houses  or  for  his  agents  in  South 
America  or  on  commission  for  the  many  firms  whom  he  rnay  repre- 

(659) 


82  The  Annals  of  the  American  Academy 

sent.  This  established  merchant  is  constantly  a  pioneer  in  bringing 
to  the  notice  of  his  South  American  customers  the  possibilities  of 
business  in  new  articles ;  or,  as  changing  trade  conditions  arise,  the 
opportunity  for  dealing  in  staple  lines  of  American  goods  which 
had  not  hitherto  been  available  on  terms  of  competition  in  the 
foreign  markets. 

He  is  usually  the  man  to  supply  the  cash  demanded  by  the 
manufacturer,  promptly  upon  delivery  of  the  goods,  the  merchant 
doing  this  wath  his  own  capital  or  making  his  necessary  financial 
arrangements.  In  turn,  he  has  to  grant  the  necessary  credits  to  his 
customers  in  South  America,  few  of  whom  remit  in  advance ;  and  it 
is  generally  necessary  to  wait  for  remittances  until  thirty,  sixty  or 
ninety  days,  and  even  six  months,  from  the  arrival  there  of  the 
shipping  documents,  or  of  the  goods  themselves.  It  can  be  stated 
that  the  capital  of  a  merchant  exporting  to  South  America  cannot, 
as  an  average  proposition,  be  turned  over  more  than  tzvice  in  twelve 
months ! 

The  merchant  has  further  to  carry  a  direct  responsibility  for  all 
his  errors  of  omission  and  commission,  as  well  as  for  delays  in  ship- 
ments arising  from  factory,  railway  or  steamer  disappointments ;  as 
also  for  mistakes  in  the  hurried  preparation  of  consular  documents, 
which  involve  calculations  from  American  weights  into  the  metric 
system,  and  translations  into  the  Spanish  (or  Portuguese)  nomen- 
clature of  all  the  unending  variety  of  articles  in  his  invoices.  He 
is  held  at  least  morally,  and  too  often  pecuniarily,  accountable  for  any 
fluctuations  in  the  market,  whether  real  or  fancied,  that  may  operate 
to  the  disappointment  of  his  customer;  and  he  is  always  exposed  to 
repudiation  of  his  shipments,  by  customers  over-ready  to  shirk  their 
obligations  on  any  sort  of  pretext,  brought  on  by  some  unfavorable 
change  in  the  mercantile  situation  or  by  an  adverse  turn  in  exchange 
there,  which  may  lead  a  customer  to  prefer  not  to  receive  the  goods. 

The  body  of  our  merchants  engaged  in  South  American  trade 
are  reputable  men  and  well  regarded.  Of  course,  in  all  walks  of  life, 
there  are  some  who  abuse ;  and  it  is  only  the  occasional  commission 
merchant,  over-greedy  of  profit,  who  is  responsible  for  the  feeling 
of  many  manufacturers  that  the  commission  men  altogether  are 
highly  detrimental  to  the  trade  and  should  be  eliminated  at  all  costs. 

The  merchant  is  under  heavy  expenses,  which  constantly  tend 
to  increase,  including  lavish  outlay  for  cabling;  yet  his  legitimate 

(660) 


Commerce  witJi  South  America  83 

remuneration  steadily  diminishes,  under  the  sharp  competition  he 
daily  undergoes.  For  the  few  large  markets,  capable  of  taking  big 
quantities,  business  in  staple  lines  seldom  leaves  the  merchant  a 
gross  remuneration  of  over  two  per  cent  and  he  has  often  to  work 
for  even  less  than  one  per  cent.  For  the  purchase  and  shipment  of 
miscellaneous  goods,  he  does  not  average  more  than  two  and  one- 
half  per  cent  to  three  per  cent,  coupled  with  the  giving  of  credit. 
In  the  handling  of  orders  for  small  wares,  such  as  hardware,  tools, 
glass-ware,  notions,  etc.,  etc.,  his  clerical  work  is  disproportionately 
expensive ;  and  the  merchant  is  by  no  means  recompensed  by  a  lesser 
charge  than  five  per  cent  although,  in  the  stress  of  competition,  the 
mistake  is  often  made  of  handling  such  business  on  two  and  one-half 
per  cent  to  three  per  cent  commission.  This  multitudinous  detail 
exposes  the  documentation  to  petty  and  almost  inevitable  errors, 
whether  as  to  description,  contents,  or  weights;  and  in  this  line  of 
trade  the  customer  is  usually  of  the  sort  who  makes  claims  on 
general  principles.  Were  the  merchant  to  keep  close  watch  on  the 
allowances  he  is  constantly  compelled  to  make,  to  satisfy  such  claims, 
it  would  be  demonstrated  to  him  that  the  business  soon  becomes 
absolutely  unprofitable,  when  worked  on  a  too  meagre  margin.  In 
fact,  even  the  Hamburg  commission  merchant,  who  is  supposed  to 
work  for  almost  nothing,  has  now  become  unwilling  to  pare  down  his 
commissions,  where  the  clerical  cost  and  incidental  responsibilities 
are  so  onerous. 

After  all,  this  question  of  credit  is  just  about  the  same,  whether 
the  goods  are  from  Germany,  England,  or  the  United  States.  For 
it  is  usually  the  merchant,  or  merchant-banker,  who  has  to  accommo- 
date the  customer ;  as  the  manufacturer,  whether  European  or 
American,  is  reluctant  to  carry  the  foreign  risks,  or  have  his  capital 
tied-up  awaiting  uncertain  returns.  In  substance,  the  worthy  South 
American  tradesman  gets  about  the  same  facilities  for  payment,  in 
one  or  another  form,  whether  he  buys  from  the  United  States  or 
from  Europe.  It  is  usually  the  unworthy  customer,  whether  he  be 
located  in  Chicago,  or  in  Buenos  Aires,  that  protests  the  loudest 
when  a  cautious  merchant  declines  to  grant  him  unreasonable  terms. 

All  trade  must  eventually  work  back  to  the  primitive  law  of 
barter,  which  principle  leads  up  to  a  statement  of  the  simple  fact  that 
we  now  buy  absolutely  nothing  from  South  America  unless  com- 

(661) 


84  TJie  Annals  of  the  American  Academy 

pelled  to.  Notwithstanding,  we  try  to  cajole  ourselves  into  the  idea 
that  those  countries  really  must,  almost  under  pressure,  deal  with  us, 
and  should  even  accord  us  preferential  trading  favors  not  to  be 
conceded  to  our  commercial  rivals. 

The  American  slogan  now  is  that  we  must  multiply  our  exports 
to  South  America.  Yet,  do  we  deserve  a  larger  share  of  that  trade 
than  we  already  hold?  Do  we  contemplate  increased  bartering? 
Can  we  expect  to  do  all  the  selling,  that  the  trade  shall  be  wholly 
one-sided  and  at  that  in  our  favor?  Is  not  our  tariff  "in  restraint 
of  trade"  with  South  America?  Is  not  its  "spirit"  to  buy  the  least 
possible  from  a  customer  to  whom  we  insist  upon  selling  much? 

We  already  have  ample  shipping  facilities.  We  also  have  good 
financing  facilities.  We  have  plenty  of  goods  to  sell.  We  have 
enterprising  merchants  and  manufacturers.  But,  have  we  yet  estab- 
lished the  proper  national  policy  for  dealing  wnth  the  South  American 
countries?  The  answer  is  a  negative  one  and  therein  is  to  be  found 
the  real  obstacle  to  a  fuller  and  more  rapid  development  of  our  com- 
merce with  the  southern  continent. 


(662) 


PUBLIC  INSTRUCTION  IN  PERU 


By  Albert  A.  Giesecke,  Ph.D., 
Rector  of  the  University  of   Cuzco,   Cuzco,   Peru. 


There  can  be  little  doubt  that  the  greatest  problem  confronting 
Peru  to-day  is  the  organization  and  extension  of  public  instruc- 
tion.^ The  country  is  in  a  fair  way  towards  settling  its  boundary 
controversies,  with  the  possible  exception  of  the  Tacna  and  Arica 
question  pending  with  Chile.  Hence  the  boundaries  need  no  longer 
be  the  central  theme  of  discussion  and  agitation  by  the  large 
majority  of  Peruvian  citizens. 

As  a  background  for  the  discussion  of  the  educational  problem 
in  Peru,  it  seems  expedient  to  state  briefly  some  of  the  obstacles 
which  impede  rapid  progress  to  the  best  interests  of  education.  In 
the  first  place,  the  physiography  of  the  country  merits  consideration. 
With  an  area  approximately  one  and  a  half  million  square  kilometers, 
and  a  country  practically  divided  into  three,  more  or  less,  inde- 
pendent sections,  Peru  is  severely  handicapped  in  carrying  on  the 
functions  of  government.  The  coastal  region  extends  along  the 
western  part  of  the  Republic,  in  a  strip  averaging  less  than  a  hun- 
dred miles  in  width.  It  is  generally  devoid  of  rainfall  the  year 
round.  It  occupies  about  ten  per  cent  of  the  area  of  the  republic. 
The  "Sierra"  or  mountainous  region  lies  to  the  eastward,  and  is  the 
seat  of  the  plateaus  and  high  peaks  of  the  Andes.  Roughly  speak- 
ing, it  occupies  about  twenty-five  per  cent  of  the  area  of  the  repub- 
lic. The  mountains  are  largely  responsible  for  the  climatic  condi- 
tions of  the  country.  Still  farther  to  the  east  is  an  immense  tract 
of  land,  exceedingly  rich  in  flora  and  fauna.  It  occupies  almost  two- 
thirds  of  the  area  of  the  country,  and,  with  the  exception  of  two 
or  three  small  districts,  is  practically  unknown.  Located  in  the 
upper  regions  of  the  Amazon  basin,  it  is  a  land  of  present  surprises 
and  of  great  promise  for  the  future.  At  present  it  is  sparsely  set- 
tled, and,  indeed,  inhabited  in  part  by  an  uncivilized  race. 

'I  hereby  dcsiro  to  acknowledge  the  courtesy  of  several  persons  who  have  so 
kindly  supplied  me  with  the  necessary  data,  all  of  which  is  of  an  official  character. 
I  refer  to  Dr.  Matias  Leon,  Ex-Minister  of  Instruction  ;  Dr.  H.  E.  Bard,  Adviser  to 
the  Minister  of  Instruction  ;  Dr.  Justus  Perez  Figuerola,  Director-General  of  Instruc- 
tion :  Mr.  Aurelio  Gamarra  y  Hernandez,  Chief  of  the  Bureau  of  Secondary  and 
HiRher  Education,  and  Dr.  Vincente  Delagado,  Chief  Statistician  of  the  Department 
of  Instruction. 

(663) 


86  The  Annals  of  the  American  Academy 

The  second  obstacle  to  the  rapid  development  of  a  rational 
educational  system  may  be  considered  under  the  social  organization 
of  the  country.  As  in  the  United  States,  there  is  a  great  mixture 
of  races.  The  main  distinction  in  a  comparison  between  the  two 
countries,  however,  lies  in  the  fact  that  in  the  former  country  the 
white  element  predominates,  numerically  considered,  whereas  in 
the  latter,  the  Indian,  or  Cholo,  element,  i.  e.,  the  descendants  of 
the  Incas,  comes  first.  Most  of  the  white,  and  mestizo,  or  mixed 
white  and  red  blood,  is  found  along  the  coast.  It  is  the  center  of 
influence  of  the  Spaniard.  The  other  two  regions  are  settled  chiefly 
by  the  mestizo  element.  The  negro  element  is  also  present,  and  is 
concentrated  chiefly  in  the  coastal  region.  Allowing  for  exceptions, 
there  is  naturally  a  difiference  in  the  intellectual  capacities  of  these 
race  mixtures.  This  difference  comes  out  more  clearly  in  an  in- 
vestigation of  the  location  and  work  of  secondary  and  higher  insti- 
tutions of  learning,  which  are  concentrated  chiefly  in  the  coastal 
region.  Yet  this  region  has  only  about  twenty-five  per  cent  of  the 
three  and  a  half  million  inhabitants  of  the  country.  More  might  be 
added  with  reference  to  the  influence  of  climate,  racial  assimilation 
and  the  effects  of  Spanish  colonization  upon  the  social  organization, 
but  none  of  these  presents  insurmountable  obstacles  to  the  advance- 
ment of  public  instruction. 

Political  drawbacks  also  exist,  and  they  are  most  in  evidence  in 
affecting  the  administration  of  the  public  schools  of  the  country. 

Peru  has  a  cabinet  or  ministerial  form  of  government, — as  in 
France.  The  Minister  of  Justice,  Instruction  and  Religion,  who  is 
one  of  the  six  Ministers  of  State,  has  charge  of  public  instruction. 
Under  the  minister  is  a  director-general  of  public  instruction — a 
position  which  was  created  last  January.^  The  Director-General 
therefore  has  all  the  administrative  work  of  public  instruction  in 
his  hands.  Under  him  are  the  following  chiefs  at  the  head  of  their 
respective  bureaus.  These  include  the  chief  of  secondary  and  higher 
education ;  of  the  personnel  and  general  administration,  an  import- 
ant post  under  the  present  organization ;  of  equipment  and  sup- 
plies ;  of  statistics ;  and  archives.     Aside  from  these  bureaus  under 

'Previously  there  was  a  Director-General  of  Justice,  Public  Instruction  and 
Religion,  l)ut  by  decree  that  of  Public  Instruction  has  been  established  separately. 
Legally  the  work  of  secondary  and  higher  education  was  left  in  the  hands  of  this 
Director,  and  primary  education  in  the  hands  of  another  Director. 

(664) 


Public  Instruction  in  Per*u  87 

the  director-general,  the  minister  has  an  expert  adviser  in  matters 
appertaining  to  educational  administration.  Concerning  the  present 
organization  it  would  seem  highly  desirable  to  make  the  work  of 
all  of  these  officials  free  from  political  influence,  except  that  of  the 
minister.  There  is  also  a  Superior  Council  of  Education,  but  it  has 
had  a  rather  checkered  career.  It  has  been  suggested  that  there 
be  a  separate  minister  for  education,  but  there  are  two  sides  to 
this  question,^ 

The  constitution  of  Peru  guarantees  the  existence  and  diffu- 
sion of  primary  instruction,  which  shall  be  free  and  obligatory.* 
The  present  law  of  public  instruction,  primary,  second  and  higher 
instruction,  was  passed  by  Congress  in  1901  ;  the  portion  dealing 
with  primary  instruction  was  remodeled  in  December,  1905.  Upon 
these  two  laws  are  based  numerous  executive  decrees,  amplifying 
the  system  of  public  instruction. 

Primary  Instruction 
Elementary  education  is  obligatory  for  boys  between  the  ages 
of  six  and  fourteen,  and  for  girls  between  the  ages  of  six  and  twelve. 
Primary  schools  are  of  two  classes:  (i)  elementary;  (2)  "centres 

•It  will  be  noted  that  Peru  has  been  securing  (for  some  years)  from  time  to 
time  from  Germany,  Belgium,  Switzerland,  and  other  Euroiioan  countries,  teachers 
for  the  national  colegios.  The  duties  of  these  teachers  have  been  confined  entirely 
to  teaching  in  these  schools,  or  in  a  few  instances  to  directing  them.  It  was 
only  a  year  ago  that  it  was  realized  there  was  need  of  well-trained  and  experienced 
men  in  the  administrative  branch  of  education.  Dr.  Manuel  V.  Villaran.  who  had 
made  a  thorough  study  of  the  educational  situation  (Rcvista  Univer.iitaria, 
Ano  III,  Vol.  II.  No.  23,  pp.  1-21,  and  No.  24,  pp.  105-130,  Sept.  and  Oct.,  1908), 
upon  being  called  to  the  Cabinet  with  the  portfolio  of  Justice,  Instruction,  and 
Religion,  decided  to  engage  from  the  States,  a  director  general  and  four  departmental 
instructors  of  primary  instruction,  and  a  director  and  number  of  special  teachers 
for  the  national  colegios  and  for  normal   instruction. 

Dr.  Villaran's  plans  were  only  partially  carried  out  when  a  change  of  Cabinet 
brought  to  the  department  of  instruction  a  new  Minister,  who  did  not  find  himself 
entirely  in  sympathy  with  the  plans  of  his  predecessor.  Before  this  time,  however, 
four  of  these  men  were  on  their  way  to  Peru.  They  were  men  especially  pre- 
pared, by  practical  experience  as  well  as  by  large  academic  and  professional  training, 
for  the  work  they  were  to  do.  They  are  now  rendering  important  service  of  an 
administrative  character,  the  full  value  of  which  will  receive  recognition  only 
in  time.  Dr.  H.  E.  Bard,  who  is  adviser  to  the  Minister  of  Instruction,  had  for 
some  years  before  coming  to  Peru  given  special  attention  to  the  administrative 
sciences,  and  particularly  to  the  science  of  educational  administration.  He  had 
had  valuable  practical  experience  also  in  this  field  in  the  Philippine  Islands.  Some 
far-reaching  reforms  have  already  been  effected  through  his  initiative.  It  Is 
expected  that  the  work  of  these  men  will  demonstrato  the  need  of  others  like 
them,  and  in  this  way  will  one  of  Peru's  greatest  educational  needs  be  met. 

^Article  24.  See  Constitution  of  T.atin-American  Republics  published  by  the 
International  Union  of  American  Republics. 

(665) 


88 


The  Annals  of  the  American  Academy 


escolares,"  or  literary  school  centers.  Kindergarten  schools  are 
also  provided  in  two  or  three  instances.  The  elementary  schools 
take  up  the  studies  of  the  first  two  years'  work  of  primary  educa- 
tion. From  the  following  curriculum  it  will  be  seen  that  in  these 
two  years  reading,  writing,  arithmetic,  the  metric  system,  notions  of 
geography  and  history  of  Peru,  the  Christian  doctrine  and  physical 
exercises  are  provided.  The  executive  decree  of  June  20,  1906, 
makes  a  conscious  effort  to  provide  primary  education  in  a  com- 
prehensive way,  but  in  practice  the  results  have  not  been  perfectly 
satisfactory.  The  curriculum  for  the  five  years  of  primary 
instruction  follows : 


First  Year 

Second   Tear 

Third  Year 

Fourth   Year 

Fifth  Year 

1.    Read 

in  g 

Reading 

and 

Reading        and 

Reading       and 

Reading  and 

and    writing 

writing 

writing 

writing 

writing 

2.   Arithmetic 

Arithmetic 

Composition 

Composi  t  i  o  n. 

Composition    and 

and       gram- 

grammar 

grammar 

mar 

8.    Object 

les- 

N  0  1 1  0  n  J 

!     of 

Arithmetic 

Arithmetic,   In- 

Arithmetic 

Bon    (plants, 

geog  ra  ] 

?  h  y 

cluding  met- 

human body, 

with    special 

ric  system 

colors. 

sea- 

reference    to 

Bons, 

with 

Peru 

drawings    of 

objects  w 

here 

possible) 

1 

4.        Christian 

II  1  s  t  0  r  J 

'     of 

Geography, 

Geography      of 

Geography         o  f 

doctrine 

Peru 

with    special 
reference    to 
Peru 

Peru  and  the 
rest  of  Amer- 
ica 

eastern  hemi- 
sphere 

5.    Games 

and 

Object    lessons 

History     of 

History     of 

History   of  Peru 

singing 

(as    in 
year) 

first 

Peru 

Peru 

6. 

Principal 

les    of 
( labor, 
ing,  cloc 

dut- 
man 
sav- 
toral 

Notions     of 
Physics 

Physics 

Physics 

obligations, 

military 

ser- 

vice,      truth. 

cleanlin 

e  SB, 

etc.) 

T. 

Qames 
singing 

and 

Notions     of 

chemistry 

Chemistry 

Chemistry 

8. 

Natural        his- 
tory 

Natural        his- 
tory 

Natural  history 

9. 

Notions     of 
agriculture 

Notions     of 
agriculture 

Notions  of  agri- 
culture 

10. 

Notions     of 
arbor  1  c  u  1  - 
ture 

Notions     of 
arbor  i  c  u  1  - 
ture     and 
horticulture 

Notions  of  arbori- 
culture 

11. 

Manual     labor, 
geometry 
and        draw- 
ing 

Manual     train- 
ing,     geome- 
t  r  y        and 
drawing 

Manual  training, 
geometry  and 
drawing 

12. 

Music 

Music 

Carpentry  ( i  n 
boys'     schools) 

13. 

Christian    doc- 
trine 

Ethics 

Music 

14. 

Physical  train- 
ing   and    no- 
tions   of   hy- 
giene 

Physical  train- 
ing 

Notions     of 
hygiene 

Ethics 

Physical  training 
and  hygiene 

(666) 


Public  Instruction  in  Pen  89 

Selecting  at  random  one  or  two  of  the  subjects  provided  for, 
we  may  L;ct  an  idea  of  the  breadth  of  the  course  of  studies,  which 
is  not  ho\\ever  carried  out  in  practice  under  present  conditions.  In 
the  fourth  year,  the  course  in  chemistry  presumably  includes  a  study 
of  the  air,  combustion,  hydrogen  and  oxygen,  water,  chlorine,  sul- 
phur, phosphorus,  carbon,  notions  of  chemical  nomenclature,  acids, 
bases,  salts.  The  fifth-year  course  in  arithmetic  includes  mental 
operations,  the  decimal  system,  prime  numbers,  maximum  and 
minimum  divisor,  proportion,  metric  system,  weights,  measures  and 
money  systems,  bookkeeping,  commercial  documents. 

Executive  decrees  provide  for  the  division  of  the  country  into 
sixty  school  districts,  for  the  purpose  of  primary  education, 
although  previously  there  were  over  one  hundred  school  districts. 
In  each  of  these  districts  is  an  inspector  who  sees  that  the  school 
regulations  of  the  central  government  are  carried  into  effect.  There 
is  an  exception  in  the  case  of  Lima  and  Callao,  where  two  inspectors 
are  provided,  one  for  boys'  schools,  the  other  for  girls'  and  mixed 
schools."* 

In  the  past  the  inspectors  have  not  always  proved  efficient, 
visiting  the  schools  infrecjuently,  and  knowing  or  caring  little  about 
the  requirements  of  their  position.  Consequently,  there  has  been 
a  recent  decree  providing  qualifications  which  may  result  in  a  better 
system  of  inspection.  The  new  decree,  however,  has  one  serious 
defect  in  that  it  requires  the  inspector  to  telegraph  the  fact  of  his 
intended  visit  to  the  director-general  in  Lima  and  to  the  sub-prefect 
of  the  province  which  he  expects  to  visit.  By  this  means  the  school 
authorities  may  secure  advance  notice,  and  be  prepared.  An  in- 
spector will  now  be  required  to  have  (i)  a  degree  (bachelor,  or 
diplomas  from  the  normal  school),  (2)  the  inspectors  now  in  office 
must  take  an  examination  within  ninety  days  to  prove  their  compe- 
tence, otherwise  new  inspectors  are  to  be  appointed."  Furthermore, 
the  Minister  of  Public  Instruction  has  another  check  on  the  work 
of  the  schools  in  the  special  inspectors  (visitadores)  who  may  be 

''Tlic  latest  decree  is  dated  January  22,   1010. 

'Executive  decree  of  .January  22,  lOlfl.  The  previous  decree  provided  for 
departmental,  provincial  and  district  inspectors.  The  present  plan,  therefore, 
according  to  the  claims  of  its  advocates,  effects  an  economy  in  the  number  of  in- 
spectors, increases  their  efficiency,  reduces  the  amount  of  official  routine,  and  eaves 
money. 

{667) 


90  The  Annals  of  the  American  Academy 

appointed  from  time  to  time  by  the  minister  in  order  to  make  special 
investigations. 

In  general,  at  least  one  elementary  school,  giving  the  work  of 
the  first  two  years  of  primary  instruction,  must  be  established  for 
every  two  hundred  inhabitants.  The  departmental  capital  must  have 
at  least  two  primary  schools — one  for  boys,  the  other  for  girls ;  the 
provincial  capital  must  have  at  least  one  primary  school  even  if  the 
population  should  not  be  large  enough.  Public  schools  are  estab- 
lished by  decree. 

The  last  annual  report  of  the  Minister  of  Instruction  shows  that 
the  number  of  schools  in  actual  operation,  school  year  1907,  was 
2,262,  or  about  one  hundred  less  than  there  should  have  been.  Of 
these  over  ninety  per  cent  gave  instruction  for  the  first  two  years 
of  primary  education  only — 840  were  for  boys,  677  were  for  girls, 
and  745  were  mixed  schools  for  boys  and  girls.  Instruction  was 
given  to  161,660  pupils  during  the  year,  two-thirds  of  whom  were 
boys,  and  only  5,450  of  these  received  instruction  in  the  upper 
classes  of  the  primary  school.  The  average  daily  attendance  was 
about  sixty  per  cent.  With  the  pupils  in  private  schools,  less  than 
one-fifth  of  a  million  of  children  were  receiving  primary  education 
throughout  the  Republic.'^  This  appears  to  be  a  small  proportion 
for  a  population  estimated  at  more  than  3,500,000  inhabitants.^ 

The  following  table  will  furnish  the  details : — 

Receive  Do  not  receive 

instruction  instruction 

Boys  .  . .    65.536  164,794 

Girls     ..    34,478  151,736 


Could 

Could 

Could 

Could 

read 

not  read 

write 

not  write 

73,778 

156,609 

50,615 

179,726 

41,273 

144,884 

28,285 

157,918 

Total    100,814  316,530  115,051  301,493  78,900  337,644 

A  census  of  school  children  within  the  age  limits^  for  the  purpose 
of  primary  education  was  made  in  1902.^** 

According  to  racial  distribution  there  were  67,928  white  chil- 
dren, 198,674  indigenous  or  native  children,   144,298  mestizos  and 

'Annual  Report  of  the  Minister  of  Instruction  for  1908,  Vol.  II,  pp.  333-337. 

«Tbe  last  general  census  was  taken  in  1876,  but  doubts  bave  been  enter- 
tained about  its  accuracy.  At  that  time  tbere  were  2,700,000  inbabitants.  Par- 
tial censuses,  etc.,  led  to  the  estimate  given  above.  The  coastal  region  has  about 
one-fourth  of  this  total,  the  Andean  region  about  five-eighths,  and  the  eastern 
region  the  rest. — A.   Garland,   Peru  in   1906    (2d  edition),  pp.   100-101. 

'Including  75,000  from  the  ages  of  4  to  6,  i.  e.,  children  who  could  attend 
a  kindergarten  school. 

"Censo  Escolar  de  la  Republica  Peruana  correspondiente  al  afio  1902. 

(668) 


Public  Instruction  in  Pcr'u  91 

5,644  blacks.  Unfortunately  it  is  impossible  to  make  comparison 
of  this  data  by  the  three  physiographic  divisions,  since  it  is  given 
only  for  the  twenty-one  departments  of  the  Republic.  For  the  de- 
partment of  Lima,  which  includes  the  capital  and  a  few  small  towns 
and  plantations,  there  were  11,038  whites,  26,664  indigenous  or 
native,  12,468  mestizos,  and  2,432  blacks.  In  a  way,  therefore,  Peru 
has  its  racial  problem  to  settle,  from  the  educational  point  of  view, 
just  as  we  have  in  the  United  States.  It  would  seem  plausible  that 
the  introduction  of  American  teachers  and  American  methods,  from 
sections  where  the  education  of  mixed  races  is  prominent,  should  be 
carefully  considered  by  the  government  of  Peru.^^ 

The  teachers  in  the  primary  schools  are  women  in  the  majority 
of  cases.  Although  supposed  to  have  a  diploma,  the  majority  of 
teachers  are  not  so  provided.^-  Thus,  out  of  2,944  teachers,  1,225 
men,  1,719  women,  two-thirds  did  not  possess  a  diploma. 

At  present  there  are  three  normal  schools — one  for  men  and 
two  for  w^omen.  Two  are  located  in  Lima,  and  a  comparatively 
smaller  one  for  women  in  Arequipa.  Previously  there  were  more, 
but  financial  and  other  difficulties  have  caused  the  closing  of  the 
others.  The  act  of  Congress  (March,  1901)  provided  at  least  three 
normal  schools  for  men,  and  three  for  women.  In  the  normal  school 
for  men  the  curriculum  provides  three  years  of  study,  which  differs 
somewhat  from  that  provided  for  the  women's  normal  school.  In 
the  normal  school  for  women  in  Lima  the  course  of  studies  is  as 
follows:  First  year:  Spanish  grammar  and  literature,  penmanship 
arithmetic,  geography,  history,  religion,  object  lessons,  domestic 
economy  and  hygiene,  manual  training,  French  or  English,  vocal 
music,  physical  exercises,  attendance  upon  model  classes  in  the 
School  of  Practice.  Second  year :  general  notions  and  anthropology 
and  infant  psychology,  pedagogy,  history,  general  hygiene,  domes- 
tic economy,  religion,  elocution  and  composition,  manual  training, 
French  or  English,  music,  physical  exercises,  attendance  upon  model 
classes  in  the  School  of  Practice.  Third  year :  Methodology,  notions 
of  the  history  of  education,  school  hygiene,  domestic  economy,  civic 
education  and  school  legislation,  manual  training,  French  or  English, 

"q.  V.  La  Educaci6n  Nacional  (6rgano  de  la  Direcci6n  do  Primera  Ensefianza), 
May.  1004,  pp.  199,  205.  Last  year  the  government  of  Peru  sent  for  some  Ameri- 
can teacbers  and  superintendents  of  schools.  This  policy  should  doubtless  be 
carried  out  on  a  larpor  scale  to  attain  the  best  results. 

"Report  of  the  Minister  of  Instruction   (1908),  Vol.  IL  P-  334. 

(669) 


92  The  AnJials  of  the  American  Academy 

music,  physical  exercises,  daily  teaching-  in  the  School  of  Practice, 
pedagogical  conferences.  The  courses  at  the  normal  school  for 
women  in  Arequipa  are  most  limited. 

The  government  pays  all  expenses  of  most  of  the  pupils  in  the 
normal  schools  in  Lima,  and  in  exchange  requires  them  to  teach  in 
the  primary  schools  of  the  respective  departments  from  which  the 
students  come  for  a  certain  number  of  years.  They  are  guaranteed 
a  minimum  salary  per  month  for  this  work.^'  During  the  school 
year  1907  the  men's  normal  school  had  fifty-three  students,  the 
women's  normal  school  in  Lima  forty-four  and  in  Arequipa,  sixty- 
three.^*  A  total  of  about  $100,000  was  expended  during  1906  for 
salaries,  equipment  and  other  expenses,  and  twenty-five  students 
were  graduated.  These  figures  fairly  represent  the  work  of  preced- 
ing years. 

Revenue  and  Expenditure  for  Primary  Education 

The  Minister  of  Instruction  has  the  portfolios  of  Justice  and 
Religion  in  addition  to  that  of  Education.  Consequently,  the  con- 
gressional appropriations  for  the  Department  of  Education  form 
only  a  part  of  the  revenues  and  expenditures  which  he  controls. 
Nevertheless,  to  insure  at  least  a  certain  amount  of  revenue  which 
would  not  depend  entirely  upon  the  action  of  Congress,  a  law  was 
passed  providing  special  sources  of  income.  All  told,  the  revenues 
for  primary  instruction  are  derived  from  the  following  sources:  (a) 
A  special  tax,  or  mojonazgo,  on  alcoholic  drinks  and  mineral  water, 
insofar  as  money  from  this  source  does  not  furnish  more  than  fifty 
per  cent  of  the  total  revenue  of  any  municipality;  (b)  local  taxes 
created  by  special  acts  of  Congress;  (c)  special  funds  and  revenues 
from  property;  (d)  thirty  per  cent  of  the  departmental  revenues, 
deducting  from  this  the  subventions  assigned  to  secondary  instruc- 
tion, on  the  basis  of  the  departmental  appropriation  of  1905  ;  (e)  five 
per  cent  of  the  national  revenues;  (/)  fines  imposed  for  infractions 
of  the  law  and  decrees  relating  to  primary  instruction.  In  1906 
these  revenues  amounted  to  $1,150,775;  in  1907  they  were  slightly 
higher;  in  1908  they  amounted  to  $1,309,090.  Owing  to  the  eco- 
nomic crisis,  the  sum  voted  by  Congress  for  1910  has  been  reduced 

"Decrees  of  April  4,  1907,  and  January,  1910. 
"Report  of  the  Minister  of  Instruction   (1908),  Vol.  II,  p.  338. 

(670) 


Public  Instruction  in  Peru  93 

considerably,  so  that  less  than  a  million  dollars  were  available  this 
year. 

Some  Defects  in  the  System  of  Primary  Education 

As  late  as  i860,  Dr.  Francisco  Calderon,  in  his  excellent 
Diccionario  de  la  Legislacion  Peruana,  stated  that  the  country  still 
felt  the  lamentable  consequences  of  the  repressive  system  of  educa- 
tion which  had  been  provided  by  the  Spanish  government  during 
the  colonial  period. ^^  Although  most  of  these  consequences  have 
disappeared  to-day,  some  still  remain.  A  temporary  decree  bearing 
on  public  instruction  had  been  promulgated  in  1855 — the  first  gene- 
ral decree  up  to  that  time.  It  remained  in  force  until  1876, 
although  attempts  had  been  made  in  the  meanwhile  to  change  it. 
By  the  latter  decree,  issued  March  19,  the  system  of  public  instruc- 
tion was  decentralized,  especially  as  regards  primary  instruction. 
The  departmental  authorities  were  intrusted  with  secondary,  the 
municipal  councils  with  primary  education,  i.  e.,  so  far  as  the  finan- 
cial powers  were  concerned.  The  directive  body  was  a  Superior 
Council  of  Public  Instruction.  It  soon  became  evident  that  the  local 
authorities  did  not,  or  would  not,  provide  suitable  funds,  and  mat- 
ters went  from  bad  to  worse.  Under  these  circumstances  Congress 
enacted  a  law  in  1901  centralizing  the  administration  to  a  large  ex- 
tent— a  work  which  has  been  carried  out  more  thoroughly  by  the 
act  of  1905,  for  the  central  government  was  given  full  control  of 
public  instruction. ^° 

The  majority  of  the  reports  of  the  Ministers  of  Instruction 
throughout  this  period,  aside  from  the  question  of  administrative 
centralization,  emphasize  the  importance  of  primary  education. 
Yet  almost  invariably  these  same  reports  state  that  primary  educa- 
tion was  in  a  condition  far  from  satisfactory.  The  complaints 
usually  take  the  form  of  lack  of  money,  lack  of  schools  and  equip- 
ment, dearth  of  suitable  teachers,  and  the  need  of  better  salaries, 
and  more  punctual  payment  of  teachers.  Thus,  in  his  report  for 
1893,  the  Minister  of  Instruction  pleads  for  a  broader  basis  of  jirim- 
ary  education  in  accordance  with  the  Constitution,  and  complains 
of  the  comparatively   large   sum   spent   for   secondary   and   higher 

"Vol.   IT.   p.   324. 

i^ExposicIon    sobre    ol    Estado    de    la    Instruccloii    I'flblica    en    el    Pert    envlado 
al  Congroso  Pan-Americano  de  Chile,  pp.  4-6. 

(671) 


94  The  Annals  of  the  American  Academy 

education,  when  the  majority  of  the  children  of  the  country  did  not 
even  know  how  to  read  or  write ;  when  many  of  the  provinces  did 
not  have  teachers,  nor  school  building's,  nor  any  income  for  the  most 
indispensable  equipment.  He  blamed  these  conditions  largely  upon 
the  decentralized  system  of  administration.^'  Unfortunately,  the 
defects  which  existed  under  the  decentralized  system  of  administra- 
tion have  by  no  means  disappeared.  With  several  exceptions,  they 
are  just  as  glaring  as  before.  The  main  defects  lie  in  the  administra- 
tion itself,  and  the  lack  of  sufficient  funds  to  carry  out  a  progressive 
program  of  reforms.  The  administrative  machinery  needs  remodel- 
ing, but  should  undoubtedly  remain  centralized.  The  financial  prob- 
lem is  considered  very  serious  at  present,  but  even  here  there  is 
room  for  improvement  in  the  expenditure  of  the  money  voted  by 
Congress  for  schools.  The  State  could  really  spend  profitably  five 
times  the  sum  voted  for  this  year.  It  would  then  be  in  a  much  bet- 
ter position  to  carry  out  the  provision  of  the  Constitution  providing 
obligatory  primary  education. 

This  applies  with  added  force  to  the  education  of  girls  by 
public  authority.  As  one  prominent  Peruvian  writer  puts  it:  "So 
long  as  the  intellectual  and  social  level  of  the  family  is  not  raised, 
by  the  education  of  the  mother,  our  people  will  forge  ahead  very 
slowly.  That  task,  the  realization  of  which  is  of  national  import- 
ance, belongs  to  man,  who  should  make  it  a  reality.  Women  cannot 
at  one  and  the  same  time  attempt  the  problem,  propose  the  remedy, 
and  bring  to  pass  the  miracle.  The  task  belongs  to  man.  The  surest 
way  is  to  multiply  the  centers  of  instruction  and  provide  for  the 
better  education  of  woman."  ^^ 

Secondary  Education:  Administration  and  Curriculum 

Secondary  education  is  under  the  direction  of  the  Minister  of 
Instruction.  Outside  of  Lima  the  prefect  of  the  department  acts 
for  the  Minister.  The  act  of  1901  forms  the  ground  work  upon 
which  is  based  the  present  decree  relating  to  secondary  education. 
Until  this  school  year  (March  i,  1910,  to  February  28,  191 1),  the 

"rage  XXV.  Cf.  also  report  for  1S91,  page  xli  ;  1S92,  pp.  23,  2G,  30 ;  1894, 
p.  XXXV,  etc. 

'^Elvira  Garela  y  Garcia.  Tendencias  de  la  Educaclon  Feminina,  p.  37. 
This  report  was  presented  to  the  Pan-American  Congress  of  1908.  Cf.  also  article 
by  L.  S.  Rowe  In  report  of  U.  S.  Commissioner  of  Education,  1909,  pp.  326,  327. 

{672) 


Public  Instruction  in  Peru  95 

decree  of  March,  1904,  was  in  force.  It  regulated  the  curriculum 
and  gave  in  general  outlines  the  subject  matter  to  be  taught  in  each 
course.  Beginning  with  this  year  the  following  curriculum  has 
been  introduced  by  the  decree  of  January  29,  1910: 

First  Year         Hrs.  Second   Year       Hrs.  Third  Year        ffrs.         Fourth  Year       Era. 

Spanish    4     Spanish    4     Spanish    3  Spanisli   liti-rature.  .  3 

Modern   languages    .    3     Modern   languages    .    .'{     Modern   languages    .    3  Modern  languages  . .  2 

History 3     General    history    ...    3     General  history  ....    2  General   history    ...  3 

General       geography         Geography  of  Europe         Geography   of  Amer-  History  of  I'eru    ...  2 

and   geography    of  and  Africa 2         ica  and  Oceanioa.    2 

Asia 2 

Arithmetic 5    Arithmetic 1     Algebra     2     Philosophy     5 

Zoology 3     Algebra     2    Geometry    2     Civics    1 

Religion    1     Geometry    2    Geology  and  mineral-        Trigonometry 1 

ogy    2 

Penmanship     1     Botany    3     Physics     3  Physiology  and  anat- 
omy     1 

Drawing     2    Religion    1     Chemistry    3     Physics     3 

Music    1     Penmanship 1     1  )rawing     2     Chemistry    2 

Physical  exercise    .  .  .2.   I>rawing     2     Music    1     Drawing     2 

Music    1     Physical  exercise   . .    2  Physical  exercise    .  .  2 

Physical  exercise    . .    2 

Total  hours 27  27  27  27 


The  principal  changes  over  the  previous  curriculum,  and  some 
of  them  are  undesirable  changes,  include  fewer  hours  devoted  to 
the  study  of  modern  languages,  and  more  hours  to  philosophy, 
which  was  added  to  the  studies  of  the  fourth  year,  physical  exer- 
cise, and  the  exact  sciences.  Prior  to  1904,  secondary  education  was 
given  in  a  six-year  course.  The  change  to  four  years  was  based 
in  large  part  upon  the  French  reforms  of  1902.^''  Although  the  de- 
crees have  provided  the  full  course  of  studies  in  secondary  education, 
it  has  not  always  followed  that  each  year's  work  has  been  given  in 
full  in  each  colegio. 

Last  year  the  government  had  also  approved  a  plan  of  com- 
mercial education  for  Guadalupe  Colegio,  which  I  had  the  honor  to 
formulate.  It  gives  the  student  a  chance  to  get  secondary  education 
which  will  put  him  more  in  harmony  with  his  economic  environment. 
There  is  great  need  for  such  education  owing  to  the  unusually  large 
proportion  of  those  who  enter  upon  professional  careers — law,  medi- 
cine, engineering.  Commercial  education  must  occupy  an  exceed- 
ingly important  position  in  the  educational  problem  of  all  Latin- 
American  countries  during  the  next  two  decades.  Commercial 
sections  have  already  been  established  in  several  other  colegios  since 

^^Exposicion  sobre  el  estado  de  la  Instruccion  Publica  en  el  Peru,  p.  19. 

(673) 


96 


The  Anuals  of  the  American  Academy 


then.    The  plan  of  studies  for  the  commercial  department  at  Guada- 
lupe  Colegio   includes   the   following :-° 


First  Year         Ilrs. 
Spanish     aud     com- 
mercial correspon- 
dence      4 

English     5 

Outlines    of    general 

history 4 

Arithmetic     5 

GeoRraphy    (physical 

and  general)    ....  4 

Natural  history  ....  4 

Penmanship     1 

Physical  exercise    . .  2 

Total    houra    29 


Second   Year       Ilrs. 
Spanish     and     com- 
mercial correspon- 
dence        4 

English     4 

French    (or    German 

or    Quechua)     ...    2 
Commercial        arith- 
metic and  algebra  4 

Bookkeeping     3 

Commercial  products 
with  chemical  ex- 
periments         r5 

Penmanship     1 

Shorthand  and  type- 
writing    .  .  .  .  .\  . .    7 
Physical  exercise   . .    1 

29 


Third  Year         Ilrs. 
Spanish   literature..    3 

English    .'5 

French       (or      other 
languages)         c  o  n- 

tinued., 3 

History  of  Peru  and 
neighboring  coun- 
tries        3 

Geometry    3 

Bookkeeping    '.\ 

Com'l    geography    .  .    4 

Physics     3 

Shortlinnd  and  type- 
writing         4 


29 


Fourth  Year        Ilrs. 
Spanish   literature..    2 

English     3 

Other  languages 

(continued)      ....    3 
History  of  commerce 
and     modern      in- 
dustrial   history .  .    8 
Commercial       arith- 
metic         2 

Chemistry    5 

Civil          government 
and      notions      of 
commercial    law.  .    3 
Political  economy...    3 
Shorthand  and  type- 
writing      3 

27 


The  present  law  on  secondary  education  (iQOi)  provides  two 
types  of  schools — the  colegio  and  the  liceo.  The  work  of  the  for- 
mer can  be  determined  by  referring  to  the  curriculum  already  given. 
The  colegio  was  intended  to  be  a  stepping-stone  to  higher  education. 
The  liceo  was  intended  to  provide  instruction  adapted  to  agriculture, 
commercial  education  and  mining  and  mechanical  arts,  "in  order 
that  pupils  might  acquire  the  knowledge  indispensable  for  dedicating 
themselves  to  industries  dependent  on  those  branches  of  instruction." 
Colegios  were  to  be  established  in  places  where  universities  were 
located,  and  in  departmental  capitals  at  the  discretion  of  the  Supe- 
rior Council  of  Public  Instruction.  Liceos,  according  to  the  law, 
were  to  be  established  in  provincial  capitals  (loi  provinces  in  Peru) 
by  the  same  Council.  As  yet  liceos  have  not  been  established,  nor  is 
there  any  likelihood  of  such  action  taking  place.  The  course  of 
studies  was  to  be  formulated  by  the  Council  as  the  basis  for  an 
executive  decree,  and  instruction  in  the  colegio  or  the  liceo  was  to 
last  six  years.  No  plan  of  studies  could  be  modified  during  a  period 
of  five  years.  Yet  by  decree  of  1904,  the  course  of  studies  was  cut 
down  to  four  years  in  the  colegio,  the  only  institutions  of  secondary 
instruction  in  existence,  and  the  amount  of  work  per  year  in- 
creased. Whatever  advantages  may  have  been  produced  by  cutting 
down  the  course  to  four  years,  this  action  illustrates  one  of  the 
defects  from  which  the  educational  work  suffers.     I  refer  to  the 


•"Decree  of  January  29,  1910. 


(674) 


Public  Instruction  in  Peru  97 

plethora  of  decrees  introduced  by  rapidly  changing-  ministers. 
Some  of  the  decrees,  moreover,  are  evidently  a  violation  of  the  spirit, 
if  not  the  letter,  of  the  laws  of  Congress. 

The  Director  and  the  Professors 

In  each  colegio  and  licco  the  law  of  1901  made  provision  for  a 
director,  a  sub-director,  a  secretary,  the  professors,  inspectors,  and 
the  office  personnel.  The  director  is  supposed  to  have  received  a 
university  degree,  but  this  provision  is  not  always  enforced.  He  is 
expected  to  reside  in  the  colegio.  He  is  responsible  for  the  carrying 
out  of  laws  and  other  regulations ;  for  the  discipline  of  the  school ; 
for  the  work  of  the  employees  ;  for  the  proper  accounting  of  the 
revenues  of  the  school ;  for  the  calling  of  faculty  meetings ;  and 
for  the  annual  report  showing  certain  details  with  reference  to 
matriculation  and  examination  of  students,  equipment,  etc.  The 
sub-director  has  to  do  more  directly  with  discipline,  and  aids  the 
director.  He  is  also  expected  to  live  in  the  school  building  if  there 
are  any  students  boarding  at  the  institution. 

The  professors  are  classed  as  full  professors  and  assistant 
(adjunto)  professors.  The  former  may  hold  their  position  for  ten 
years  as  a  result  of  a  competitive  examination — a  position  which 
may  be  made  permanent  if  the  professor  has  written  a  meritorious 
scientific  work  within  this  limit.  The  Superior  Council  of  Pub- 
lic Instruction  decides  on  the  merits  of  the  case.  Less  than  a  dozen 
positions  of  this  type  exist  to-day,  in  a  total  teaching  staff  for  all 
national  colegios  of  more  than  400.  The  appointment  of  professors 
is  by  the  Director,  or  by  the  government  directly — depending  on  the 
subjects  to  be  taught.  Salaries  are  by  no  means  uniform  in  the 
colegio.  Moreover,  many  professors  simply  teach  part  of  the  time 
in  a  national  colegio  and  devote  the  rest  of  their  time  in  private 
colegios  or  engage  in  other  work.  Complaints  have  been  made  on 
this  score,  as  well  as  regards  the  salary,  which  may  be  said  to  aver- 
age about  five  dollars  per  month  for  one  hour  of  instruction  per 
week.  The  adjunto  professors  simply  replace  the  regular  profes- 
sors in  case  of  absence  of  the  latter. 

Quite  a  number  of  foreign  teachers,  chiefly  German,  Belgium 
and  Swiss,  have  been  teaching  in  the  national  colegios  during  the 
last  three  or  four  decades.    It  must  be  added,  however,  that  they  are 

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98  The  Annals  of  the  American  Academy 

by  no  means  looked  ui)on  with  favor  by  the  native  teachers.  The 
professor  is  aided  by  inspectors  in  maintaining  discipline  in  the 
class-room.  This  system  of  discipline  has  its  counterpart  in  few 
educational  codes  of  other  countries ;  it  certainly  does  not  offer  any 
real  advantages. 

Students  in  Secondary  Institutions 

The  school  age  of  pupils  attending  the  colegios  is  presumably 
from  thirteen  to  seventeen.  The  former  decree  rquired  the  pupils 
to  have  completed  the  twelfth  year,  but  in  practice  this  has  not 
always  been  insisted  upon.  The  new  decree  requires  pupils  of  the 
first  year  to  be  between  the  ages  of  twelve  and  fifteen.  Admission 
to  the  colegio  may  be  by  examination,  or  upon  satisfactory  comple- 
tion of  primary  instruction.  The  latter  method  prevails  almost 
entirely. 

There  were  twenty-eight  national  colegios  in  Peru  in  1908  with 
a  total  of  3,289  pupils.  The  largest  and  most  important  by  far  is 
Guadalupe  Colegio,  in  Lima,  with  over  five  hundred  pupils.  In 
fact  this  colegio  serves  as  the  model  for  the  others,  and  has  a 
building  costing  all  told  about  half  a  million  dollars.  In  1904  there 
were  twenty-three  colegios  with  a  total  of  2,041  pupils.  Only  three 
of  the  national  colegios  are  for  girls,  with  a  total  of  about  200 
pupils.  These  three  colegios  are  located  in  Cuzco,  Ayacucho  and 
Trujillo.  Supplementing  the  national  colegios  are  the  private  cole- 
gios, located  chiefly  in  Cuzco  and  Lima,  and  directed  by  the  church, 
or  as  business  ventures.  These  private  colegios  numbered  thirty- 
four  in  1908,  of  which  twenty  were  for  boys,  and  fourteen  for  girls. 
The  number  of  boys  who  attended  totaled  1,016,  of  girls,  275. 

The  law  provides  that  pupils  may  board  in  the  colegio.  The 
maximum  number  of  such  pupils  is  determined  by  the  Superior 
Council  of  Public  Instruction,  according  to  the  law,  but  not  in  prac- 
tice. Many  pupils,  both  in  national  and  private  colegios,  take 
advantage  of  this  provision  of  the  law. 

The  expense  of  a  pupil  in  Guadalupe  Colegio  may  be  taken  as 
representative.  The  charges  here  include  the  following:  Matricula- 
tion fee,  $1  ;  for  annual  examinations,  $2;  tuition,  $20  per  year,  for 
pupils  in  the  primary  grades  which  happen  to  be  given  in  this  colegio, 
and  for  the  first  two  years  of  secondary  instruction,  and  $30  for  the 

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Public  Instruction  in  Po'u  99 

last  two  years  of  secondary  instruction ;  board  and  lodging  for  the 
year,  $105;  fees  for  the  use  of  equipment,  $3;  although  third-  and 
fourth-year  students  pay  $2.50  additional  for  the  use  of  the  labora- 
tories. Laundry  charges,  for  those  who  care  to  avail  themselves  of 
the  opportunity  amount  to  $1.50  per  month.  In  1909  Guadalupe 
Colegio  provided  board  and  lodging  for  175  pupils,  and  in  addition 
board  for  over  200  additional  pupils.  This  year  the  number  was 
almost  doubled,  owing  to  extensions  and  improvement  to  the 
building  still  under  way. 

Practically  each  department  gives  scholarships  to  a  limited 
number  of  pupils,  many  of  whom  are  sent  to  Guadalupe  Colegio. 
Such  a  scholarship  provides  all  tuition  and  living  expenses. 

The  students  are  not  accustomed,  as  a  general  rule,  to  do  much, 
if  any,  school  work  at  home.  School  hours  are  from  8  to  II  in  the 
morning,  and  i  to  5  in  the  afternoon,  six  days  per  week.  As  the 
curriculum  provides  less  than  thirty  hours  of  class-room  work,  the 
other  hours  are  utilized  for  study,  physical  training  and  military 
drill.  Irregularity  of  attendance  on  the  part  of  pupils,  and  even  of 
professors,  is  one  of  the  marked  defects  of  administration  which 
merits  rigorous  corrective  measures. 

Examinations  and  Prizes 

Mention  must  be  made  of  the  system  of  prizes  existing  in  all 
branches  of  education — public  as  well  as  private.  Medals,  books  and 
other  useful  objects  are  distributed  for  the  meritorious  at  the  close 
of  the  school  year.  The  annual  exercises  correspond  to  our  high 
school  commencement,  only  here  the  exercises  come  at  the  close  of 
the  year.  The  prefect  of  the  department,  or  in  Lima,  the  Minister 
of  Instruction,  and  perhaps  even  the  President,  and  other  school 
authorities,  attend  the  exercises  at  the  national  colegio. 

The  system  of  examinations  is  worthy  of  special  attention.  At 
the  close  of  each  of  the  four  years  there  is  an  examination  in  each 
subject  in  the  official  program  of  studies.  The  term  work  counts 
one-third  of  the  general  average.  The  written  examination,  usually 
lasting  less  than  one  hour,  counts,  one-third;  and  the  oral  exami- 
nation, usually  five  to  ten  minutes  for  each  pupil,  the  other  third. 
For  national  colegios,  special  examining  boards  of  three  members 
each  are  appointed  by  the  Director.     The  professor  of  the  class 

(677) 


lOO  The  Annals  of  the  American  Academy 

acts  as  president  of  the  board.  For  private  colegios  whose  pupils 
desire  to  present  themselves  for  the  examination  in  accordance  with 
the  official  program,  three  special  examining  boards  are  appointed 
by  the  government.  For  Lima,  they  are  appointed  by  the  Minister ; 
for  the  departments  by  the  prefects.  These  boards  examine  in  let- 
ters, sciences,  and  languages  respectively.  It  was  my  privilege  to  act 
as  president  of  the  last  mentioned  board  for  Lima  during  1909. 
The  examining  boards  for  private  colegios  receive  a  fee  for 
every  student  who  is  examined,  regardless  of  whether  he  presents 
himself,  or  whether  he  passes  the  examination.  For  national  col- 
egios one  copy  of  the  marks  is  sent  to  the  Minister  of  Instruction ; 
for  private  colegios  one  is  sent  to  the  Minister,  one  is  left  in  the 
colegio  itself,  and  the  third  is  sent  to  the  national  colegio  of  the 
department  in  which  the  private  colegio  is  located.  The  examining 
boards  for  private  colegios  are  also  required  to  prepare  a  report  for 
the  Minister  relative  to  the  pedagogical  conditions  existing  in  each 
colegio  ■u'hich  has  been  visited.  This  board  can  only  examine  in  the 
colegios  which  have  previously  sent  to  the  Minister  a  request  for 
such  examination,  including  in  this  request  the  list  of  students  who 
are  to  be  examined.  Practically  all  private  colegios  do  this.  A 
method  of  examination  somewhat  similar  prevails  in  the  universi- 
ties. The  system  is  not  only  cumbersome  and  time-consuming  but 
in  the  public  schools  at  least  it  is  subject  to  log-rolling  methods. 
Moreover,  the  actual  examinations — oral  and  written — need  modi- 
fication. Even  more  serious  defects  might  be  noted  as  regards 
the  examinations  for  private  colegios.  A  competent  national  exam- 
ining board,  or  perhaps  even  several  departmental  boards,  should 
provide  uniform  examinations  based  on  the  official  curriculum. 

Income  and  Expenditures 

The  income  of  national  colegios  consists  (i)  of  the  sum  voted 
by  Congress;  (2)  any  sum  voted  by  the  department;  (3)  special  in- 
come assigned  to  a  colegio;  (4)  fees  of  students;  (5)  rent  from 
property  owned  by  the  school — usually  insignificant.  The  budget 
of  each  colegio  is  made  up  toward  the  close  of  the  school  year  by  an 
Economic  Council.  This  council  consists  of  the  Director,  the  treas- 
urer, a  professor  of  the  colegio  and  two  fathers  whose  sons  are 
attending  the  school.     The  council  meets  several  times  during  the 

(678) 


Public  Instruction  in  Pern  lOl 

year  to  consider  financial  matters  of  the  coleg-io,  and  towards  this 
end  it  is  generally  convened  by  the  Director. 

For  the  twenty-eight  colegios  in  1908,  the  total  income 
amounted  to  $310,000,  about  twenty-five  per  cent  of  which  came 
from  tuition  fees.  It  was  spent  in  large  part  for  salaries.  A  smaller 
sum  was  spent  for  maintenance  of  the  school  buildings,  equipment, 
and  supplies.  On  the  whole  there  should  be  more  money  appro- 
priated for  secondary  education,  although  it  should  at  the  same  time 
constitute  a  smaller  proportion  of  the  total  spent  on  public  instruc- 
tion than  is  the  case  at  present.  The  objects  towards  which  this 
increase  could  be  devoted  advantageously  include :  ( i )  adequate 
buildings  and  equipment;  (2)  pay  of  professors;  (3)  extension  of 
commercial  education  in  various  national  colegios. 

There  is  need  for  greater  elasticity  in  the  courses  open  to  stu- 
dents in  the  colegio.  The  law  of  1901,  in  providing  the  liceos, 
sought  to  attain  this  end.  The  financial  condition  of  the  country, 
however,  does  not  justify  separate  schools.  Separate  departments 
within  the  colegio  should  be  provided  along  the  lines  of  the  organi- 
zation in  our  high  schools. 

The  establishment  of  a  commercial  department  in  the  leading 
colegio  of  the  country  ij  a  step  in  the  right  direction.  After  the 
adoption  of  a  well-considered  plan  providing  separate  departments 
for  the  colegio,  the  government  should  make  an  earnest  effort  to 
encourage  a  larger  proportion  of  the  students  to  attend  the  national 
colegios  than  is  the  case  at  present.  As  it  is,  the  national  colegio  is 
superior  to  the  private  colegio  from  almost  every  point  of  view  and 
yet  for  one  reason  or  another  about  forty  per  cent  of  the  total  num- 
ber of  students  are  attending  private  colegios.  It  is  a  fact  of  some 
significance  that  there  is  no  national  colegio  for  girls  in  Lima,  and 
that  there  are  only  three  in  the  country. 

Higher  Education 

The  universities  of  Peru  include  the  University  of  St.  Mark  in 
Lima,  founded  1571  by  Pius  X  and  royal  decree  of  Philip  II,  and 
the  "minor"  universities  of  Cuzco,  Arequipa  and  Trujillo.  These 
were  established  in  1692,  1835  and  1824  respectively.  The  univer- 
sity of  Cuzco  was  closed  temporarily  last  year  owing  to  certain 
irregularities.     The  occasion  gave  rise  to  a  sharp  discussion  at  the 

(679) 


102 


The  Annals  of  the  American  Academy 


recent  regular  session  of  Congress,  and  the  executive  was  given 
power  to  provide  for  the  reorganization  of  the  university.  It  will 
probably  be  a  matter  of  two  or  three  years  when  Congress  will  re- 
vise the  law  affecting  higher  education. 

The  University  of  St.  Mark  has  six  faculties— theology,  juris- 
prudence, medicine,  natural  and  mathematical  sciences,  letters,  and 
political  and  administrative  sciences.  The  University  of  Cuzco  has 
faculties  of  jurisprudence,  letters,  political  and  administrative 
sciences,  and  a  "section"  or  partial  faculty  of  natural  science.  The 
other  two  have  these  same  faculties  with  the  exception  of  the  last 
mentioned. 

University  instruction  is  controlled  by  the  state,  but  there  is 
more  autonomy  in  higher  education  than  in  secondary  or  primary  in- 
struction.    The  administration  of  each  university  is  under  the  im- 
mediate jurisdiction  of  a  University  Council.     Its  duties  are  similar 
in  nature  to  those  of  the  board  of  trustees  in  our  large  private  uni- 
versities.    For  Lima,  it  consists  of  the  rector,  the  vice-rector,  the 
secretary,  the  deans  of  the  various  faculties  and  another  delegate 
from  each  faculty.     The  delegates  are  elected  by  the  professors  of 
the  respective  faculties.     In  the  other  universities  the  Council  in- 
cludes all  of  the  professors.     The  Council  administers  the  property 
of  the  university,  approves  the  annual  budget,  authorizes  special 
expenditure,  provides  for  auditing  of  accounts,  acts  upon  the  propo- 
sals of  the  rector  for  the  better  administration  of  the  institution ; 
formulates  the  by-laws,  creates  or  changes  courses  and  professor- 
ships, proposes  to  the  Superior  Council  of  Public  Instruction  changes 
deemed  essential  in  granting  university  degrees — bachelor  or  doctor. 
The  rector  of  the  university  must  have  a  doctor's  degree,  and 
although  appointed  as  a  rule  for  four  years,  may  succeed  himself. 
He  and  the  vice-rector  are  normally  elected  by  the  University  Coun- 
cil, except  the  University  of  St.  Alark,  where  only  the  deans  of  the 
faculties   make   the   selection.     The   rector   is   responsible   for  the 
administration  and  progress  of  the  university,  and  acts  as  the  inter- 
mediary in  communication  with  the  Minister  of  Education.     Each 
faculty  elects  its  own  dean  and  sub-dean,   formulates  its  budget 
which  it  submits  later  to  the  University  Council,  examines  candidates 
for  degrees,  approves  the  outline  of  studies  for  each  course,  author- 
izes payment  by  the  dean  of  sums  exceeding  $50,  and  makes  sug- 
gestions with  reference  to  the  curriculum.    There  are  two  grades  of 

(680) 


Public  Instruction  in  Peru  103 

professors,  viz.,  principal  or  active  professors,  and  adjunct  profes- 
sors who  replace  the  former  in  case  of  leave  of  absence.  The  lat- 
ter receive  a  salary  only  during  the  time  that  they  teach.  The  active 
professors  are  of  two  classes,  and  include  those  who  are  named  ad 
interim  and  those  who  secure  the  position  through  competitive  exam- 
ination. They  nnist  have  the  doctor's  degree.  As  a  rule  they  have 
less  than  ten  hours  of  actual  teaching  per  week;  moreover,  they  are 
almost  invariably  engaged  in  other  lines  of  activity  outside  of  uni- 
versity circles.  The  courses  within  a  given  faculty  are  usually  ar- 
ranged in  groups,  and  the  professor  must  teach  all  the  subjects 
within  a  given  group.  No  professor  is  permitted  to  give  courses  in 
more  than  two  of  these  groups.  At  the  University  of  Arequipa, 
for  example,  one  group  includes  courses  on  diplomacy,  private  in- 
ternational law,  and  history  of  the  treaties  of  Peru.  The  law  of 
1901  provides  the  courses  which  are  to  be  given;  the  arrangement  in 
groups  is  left  to  administrative  authority. 

Students  can  matriculate  in  the  University  upon  graduating 
ixon\  the  colegio. 

To  secure  a  degree  in  the  faculty  of  theology  requires  six  years 
of  study;  in  jurisprudence,  five  years;  medicine,  seven  years; 
sciences,  letters,  or  political  and  administrative  sciences,  three  years. 
These  are  required  for  both  degrees,  viz.,  bachelor  and  doctor.  A 
student  is  permitted  to  register  in  several  faculties,  under  certain 
restrictions.  In  order  to  matriculate  in  the  faculties  of  jurispru- 
dence and  political  sciences  a  student  must  have  completed  two 
years  in  the  faculty  of  letters.  For  example,  he  may  matriculate  in 
the  faculty  of  political  and  administrative  sciences,  as  a  regular 
student,  and  also  in  the  faculty  of  letters  to  pursue  special  or 
regular  advanced  courses.^^ 

With  the  exception  of  the  University  of  St.  Mark,  the  univer- 
sities have  little  property  of  their  own  from  which  they  may  secure 
revenue.  Hence  most  of  their  income  comes  from  the  state  sub- 
ventions. In  1908  the  income  for  all  four  universties  amounted 
only  to  a  third  of  a  million  dollars.  Of  this  total,  matriculation  fees 
furnished  sixteen  per  cent  of  the  total  income  of  the  University  of 
St.  Mark  ;  fifteen  per  cent  in  the  University  of  Arequipa  ;  twenty-five 
per  cent  in  the  University  of  Cuzco ;  and  thirty  per  cent  in  the  Uni- 

'^Annual  Report,  Minister  of  Education,   1008. 

(68i) 


104  ^^''-^  ^■-'"''"/-^  of  the  American  Academy 

versity  of  Trujillo.     In  other  words,  about  one-fifth  of  the  total  in- 
come comes  from  tuition  fees. 

Besides  the  four  universities,  there  are  three  other  national  in- 
stitutions of  superior  instruction,  viz.,  the  Engineering  School,  the 
Agricultural  College,  and  the  School  of  Industrial  Arts — all  located 
in  Lima.  The  first  of  these  institutions  has  the  following  depart- 
ments: (o)  preparatory  section  requiring  two  years,  with  emphasis 
on  natural  and  mathematical  sciences;  {h)  department  of  civil 
engineering,  3  years;  {c)  of  mining  engineering,  3  years;  {d)  of 
mechanical  engineering,  3  years;  {e)  of  electrical  engineering,  i 
year. 

The  Agricultural  and  Veterinary  College  also  has  a  preparatory 
section  of  one  year,  with  special  emphasis  on  natural  sciences.  The 
regular  work  of  the  Agricultural  College  requires  three  more  years 
of  study.  In  addition  to  these  studies,  there  is  a  special  Grange 
School  giving  a  two-years'  course  along  specialized  lines. 

The  School  of  Industrial  Arts,  as  in  the  case  of  the  former  two 
institutions,  also  has  a  preparatory  section,  with  the  view  to  review- 
ing the  work  of  the  primary  education.  Hence,  in  reality,  this  school 
cannot  properly  be  classed  as  an  institution  of  superior  education. 
After  the  preparatory  work,  specialized  work  is  given  along  lines 
of  manual  training  and  industrial  arts. 

Space  will  not  permit  a  review  of  the  various  problems  which 
need  attention  in  a  revision  of  the  educational  system  of  the  country. 
Some  of  the  defects  have  been  mentioned  in  the  article,  but  what  is 
especially  needed  is  a  change  in  the  administrative  machinery  under 
a  new  law  of  Congress  which  shall  re-organize  the  work  of  public 
instruction  on  a  permanent  basis.  The  country  is  ready  for  this 
change,  and  a  special  commission  established  by  supreme  decree  last 
April  will  present  a  project  to  Congress.  It  is  certain  that  it  will 
contain  radical  changes,  but  it  is  not  so  certain  that  Congress  will 
accept  these. 


(682) 


THE  MONETARY  SYSTEM  OF  CHILE 


By  Dr.  Guillermo  Subercaseaux, 
Professor    of    Political    Economy,    University    of    Chile. 


The  period  of  paper  money  as  legal  tender  through  which  the 
country  is  passing  at  present  dates  from  1898.  (Law  of  July  31, 
1898.)  Metallic  circulation  was  re-established  in  1895  (Law  of 
February  11,  1895),  and  lasted  only  until  1898.  This  law  of  1895 
established  in  Chile  the  monetary  regime  of  gold,  the  dollar  of 
0.59/9103  grams  (or  i8d)  being  the  monetary  unit.  With  this  law 
passed  away  the  old  bimetallism  of  colonial  origin.  The  monetary 
system  of  to-day  is  thus  nominally  that  of  the  gold  standard  estab- 
lished by  the  law  of  1895,  but  superseded  by  paper  money  as  legal 
tender.  The  monetary  unit,  therefore,  is  the  paper  money  dollar, 
whose  nominal  value  (at  par)  is  eighteen  pence,  but  whose  real 
value  in  the  markets  of  international  exchange  is  very  different. 
After  these  general  explanations  about  the  national  monetary  system, 
we  may  pass  to  a  rapid  survey  of  the  more  important  economic 
characteristics  of  the  legal  tender  in  this  last  period — that  is  since 
1898. 

1.     The  First  Issue  of  Paper  Money  in  1898 

The  regime  of  gold  had  been  established  in  1895  in  the  midst 
of  a  panic  characterized  by  an  increase  of  interest  on  money,  the 
stagnation  of  business,  failures  and  disastrous  liquidations,  the 
failure  of  many  banking  institutions,  the  decrease  of  the  prices  of 
town  and  suburban  properties,  of  bonds  and  stocks,  etc.  The  change 
of  the  monetary  system  also  aggravated  the  crisis.^  Strained  con- 
ditions in  our  international  relations,  especially  with  the  Argentine 
Republic,  which  caused  great  alarm,  came  coincidently  with  this 
critical  situation  of  the  economic  state.  The  danger  of  war  became 
more  imminent  each  day,  and  tended  to  aggravate  the  economic 
situation,  since  the  public  was  convinced  that  the  declaration  of  war 
would  also  mean  the  declaration  of  a  legal  tender.    The  persistency 

1  "The   Paper   Money    in    Chile."   by   nr.    William    Subercaseaux.    Santiago,    1898. 
Similar  account   in   "Le  March^   Finance   of   1S98,"  by  M.   Raffalovich,   Paris,   1899. 

(683) 


io6  The  Aiuials  of  the  Atncrican  Academy 

of  the  government  in  maintaining  this  reform  withstood  all  outside 
pressure  until  June,  1898,  at  which  time  the  danger  of  international 
conflict  reached  its  culmination.  The  rumor  began  to  spread  in 
Santiago  that  the  government  was  preparing  to  return  to  a  legal  ten- 
der basis,  and,  as  a  consequence,  the  bank  depositors  began  to  with- 
draw their  deposits  in  order  to  save  their  gold.  They  did  not  try 
to  exchange  bank  notes  for  gold,  since  there  were  no  bank  notes  in 
circulation.  Soon  this  movement  spread  and  caused  a  run  on  the 
Santiago  banks,  wdiich  in  less  than  two  days  placed  these  institutions 
of  credit  in  a  most  precarious  condition. 

This  panic  was  confined  to  the  capital  of  the  republic;  in  Val- 
paraiso and  in  other  cities  the  position  of  the  banks  was  not 
affected.  The  banks  of  the  capital  finding  themselves  unable  to  pay 
their  depositors,  and  the  panic  threatening  to  spread  throughout 
the  republic,  the  government  authorized  these  banks  to  close  their 
doors.  Following  this  a  general  extension  was  ordered  for  thirty 
days,  during  which  period  Congress  should  determine  measures 
to  meet  the  situation.  After  a  lively  discussion  Congress  decided 
upon  the  issuance  of  $50,000,000  of  legal  tender  notes.  Thus, 
through  the  cause  of  the  fall  of  the  metallic  standard,  its  replacement 
by  paper  money  was  made  necessary  in  order  to  save  the  banks 
from  an  accidental  run.  It  was  not  possible  to  think  of  importing 
gold  from  abroad  in  order  to  weather  the  storm  of  the  panic ;  for 
the  nearest  available  hoard  of  gold  was  in  Buenos  Ay  res,  which, 
since  the  range  of  the  mountains  was  closed,  was  fifteen  days  dis- 
tant. If  the  legal  tender  had  not  been  restored  the  metallic  circula- 
tion w^ould  have  continued,  but  the  principal  banking  institutions 
of  the  country  would  have  failed. 

The  state  of  distrust  prevailing  during  this  hazardous  stage  of 
the  internal  crisis  and  international  dangers  created,  upon  the 
appearance  of  the  legal  tender,  high  premiums  on  gold.  Before 
the  factors  appeared  which  resulted  in  the  panic,  every  premium 
paid  in  order  to  acquire  metal  of  international  exchange  seemed 
justified.  In  that  way  the  principal  fluctuations  of  the  previous 
period  were  produced,  as  can  be  seen  in  the  appended  tables.  It 
was  the  moral  effect  of  an  unfavorable  impression  concerning  the 
monetary  future,  either  because  of  international  dangers  or  because 
of  the  small  amount  of  confidence  with  which  the  legal  tender  note 
issue  was  received,  that  caused  the  premiums  on  gold.    The  greatest 

(684) 


The  Monetary  System  of  Chile  107 

increase  in  the  premium  of  gold  was  produced  in  January,  1899,  in 
consequence  of  a  bill  introduced  into  the  Senate  for  the  purpose 
of  increasing  the  legal  tender  issue,  which  failed  to  become  a  law 
because  of  the  opposition  of  the  government.  These  wide  fluctua- 
tions, caused  by  the  uncertainty  and  distrust  of  the  times,  show 
the  instability  in  such  periods  of  the  value  of  paper  money  in 
relation  to  gold. 

The  international  difficulties  which  had  so  greatly  influenced 
this  situation  were  definitely  settled  during  the  month  of  May,  1902. 
The  return  of  confidence  is  clearly  shown  in  international  exchange, - 
for  the  gold  premium  steadily  decreased  from  that  time.  The  crisis 
existing  at  the  beginning  of  the  legal  tender  period  in  1898  began 
to  abate  in  a  short  time,  and  then  slowly  and  gradually  subsided. 
Beginning  wdth  1902,  the  movement  toward  a  re-establishment  of 
credit  indicates  the  beginning  of  the  new  period  of  prosperity.  And 
here,  apropos  of  the  great  fluctuation  of  exchange  in  the  first  part 
of  this  period  of  legal  tender,  we  may  call  attention  to  the  distinction 
already  made,  with  great  truth  by  some  of  the  paper  money 
theorists,^  to  the  effect  that  the  value  of  paper  money  as  an  instru- 
ment of  internal  monetary  circulation  of  a  country  must  not  be 
confused  with  the  premium  on  gold,  that  is,  with  the  standard  of 
international  exchange.  It  is  true  that  between  both  phenomena 
there  are  important  relations  that  I  cannot  mention  here,  but  it  is 
also  true  that  there  is  a  distinction.  It  may  happen  that  a  great 
depreciation  of  the  paper  relative  to  gold  might  come  as  a  conse- 
quence of  heavy  demands  for  gold  or  bills  of  exchange,  and  yet  the 
value  of  the  paper  as  a  national  monetary  unit  for  transaction  of 
domestic  business,  not  related  to  foreign  trade,  might  not  suflfer  an 
equal  depreciation ;  in  other  words,  the  prices  of  the  merchandise 
not  imported  and  other  domestic  wealth  might  not  increase.  In  that 
way  during  the  first  period  extending  from  1898  to  1902,  the  great 
increases  in  the  premium  on  gold  are  not  followed  by  proportionate 
Increases,  either  of  salaries,  prices  of  town  or  suburban  properties 
in  the  rentals  of  leases  or  of  the  prices  of  domestic  products.  As 
we  shall  see  the  depreciation  of  the  dollar  as  reflected  by  a  general 
increase  of  the  prices  resulted  later. 

*  See  table  of  premiums  on  gold. 

'  Adolf  Warner.  "Die  russische  rapiiu-walirung."     C.  Ferraris,   "Moneta  6  curso 
forzoso."      Milan,    1870.      Lexis.    Conrad's     "Ilandwlirterbuch." 

(685) 


io8  The  Annals  of  the  American  Academy 

We  must  observe,  however,  apropos  of  what  has  been  said, 
that  the  influences  which  the  premium  on  gold  or  standard  of 
international  exchange  exercise  in  a  country  with  paper  money, 
depend  to  a  large  extent  on  the  economic  relations  of  this  country 
with  foreign  countries.  In  Chile,  as  a  consequence  of  the  neces- 
sity of  importing  from  foreign  countries  a  large  part  of  the  products 
necessary  for  life — such  as  clothing  and  the  different  manufactures 
of  silk,  linens  and  wool — the  depreciation  of  paper  money  relative  to 
gold  has  a  greater  influence  in  the  general  monetary  valuation  than 
it  would  have  in  the  case  of  products  of  prime  necessity  by  itself.  In 
the  case  of  necessaries  of  life,  wide  fluctuations  of  exchange  are  felt 
very  directly  amongst  ourselves  when  they  last  for  a  fairly  long 
period. 

II.     The  Period  of  Prosperity  that  Follozved  the  Panic 

The  economic  crisis  that  made  its  painful  ravages  felt  with 
such  force  from  the  years  of  1894  until  1901  had  been  subsiding 
little  by  little,  like  the  gradual  healing  of  wounds.  The  premium 
on  gold  was  disappearing  rapidly*  as  the  probability  of  peace  with 
the  Argentine  Republic  approached  nearer  and  nearer  to  certainty. 
In  January,  1901,  it  had  fallen  to  2.6  per  cent,  but  it  again  increased 
until  in  the  first  months  of  1902,  when  the  condition  of  our  inter- 
national relations  again  inspired  distrust,  it  had  passed  thirty  per 
cent.  Beginning  in  May  of  that  year,  the  dispute  over  the  boun- 
daries with  a  neighboring  republic  having  been  definitely  settled, 
the  premium  on  gold  began  to  decrease  once  more. 

When  the  legal  tender  currency  was  increased  in  1898  the  law 
directed  that  the  customs  duties  on  imports  should  continue  to  be 
paid  in  gold  coin.  The  state  changed  the  gold  thus  received  for 
legal  tender  paper  money,  and  in  this  manner  a  small  quantity  of 
gold  which  remained  without  monetary  employment  on  account 
of  the  legal  tender  of  the  paper  money  was  kept  in  circulation  in  the 
country.  This  was  a  measure  which  had  no  solid  justification  since 
the  government  did  not  need  the  gold  collected  in  its  custom  house 
to  make  its  payments  abroad.  Moreover,  this  measure,  which  took 
away  from  the  paper  money  its  financial  support,  tended  all  the 
more  to  depreciate  it. 

The  greater  part  of  the  gold  existing  as  circulating  medium  in 

*  See  appended  table. 

(686) 


The  Monetary  System  of  Chile  109 

1898  was  exported  to  foreign  countries,  contributing  in  this  manner 
to  create  a  balance  of  trade  with  foreign  countries  favorable  to 
this  country.  The  Argentine  conflict  once  terminated,  the  financial 
situation  which  was  produced  was  not  considered  dangerous;  the 
premium  on  the  gold  continually  diminished  toward  the  end  of* 
1904. 

At  the  same  time  that  the  financial  position  of  the  legal  tender 
notes  was  being  adjusted  in  such  a  satisfactory  manner,  the  settle- 
ment of  the  crisis  was  turned  day  by  day  into  a  period  of  economic 
reaction.  In  place  of  the  desperate  depression  of  former  years, 
signs  of  activity  were  now  noticed  and  new  fields  of  wealth  and 
production  opened  to  the  country  a  larger  route  to  progress.  In 
the  barren  regions  of  the  north  important  nitrate  deposits  were  dis- 
covered, such  as  those  of  Antofagasta,  Taltal  and  Aguas  Blancas, 
which  invited  domestic  and  foreign  capital  and  led  to  the  forma- 
tion of  new  companies  for  the  exploitation  of  the  nitrate  beds. 
In  the  southern  regions,  and  especially  in  the  lands  of  Magallanes, 
the  sheep-raising  industry  produced  magnificent  results,  demon- 
strating the  great  value  of  fields  almost  wholly  unused  up  to  that 
time.  This  reaction  continued  until  the  end  of  the  year  of  1904, 
when  a  period  of  bourse  speculation  was  introduced  into  the  modest 
economic  life  of  this  country.  Gold  had  a  premium  of  less  than 
seven  per  cent,  and  the  financial  condition  being  stringent,  it  being 
felt  that  the  development  of  business  would  not  adjust  itself  to 
the  inelastic  "$50,000,000  legal  tender  plan,"  which  constituted  the 
only  circulating  medium  since  1898,  a  movement  for  improving  the 
situation  was  at  once  inaugurated,  and  Congress  and  the  executive 
department  decided  to  take  up  the  matter.  The  banks  complained 
of  the  decrease  in  their  deposits,  and  it  was  noticed  that  the  new 
impulse  given  to  business  required  an  increase  of  currency.  How 
could  this  problem  be  solved  ?  The  creation  of  a  convertible  fund,  a 
device  tried  with  success  in  the  Argentine  Republic,  was  proposed 
by  some;  that  is  to  say,  a  fund  for  the  purpose  of  issuing  notes  in 
exchange  for  gold  at  par  and  of  refunding  gold  in  exchange  for 
notes  when  the  latter  should  be  solicited.  Others  advocated  an 
increase  of  legal  tender  notes.  The  latter  idea  triumphed  and  the 
government  itself  presented  to  Congress  a  project  for  their  issuance, 
from  which  resulted  the  law  of  December  29,  1904,  which  author- 


(687) 


no  The  Annals  of  the  American  Academy 

izcd  $30,000,000  in  fiscal  notes,  which  in  addition  to  those  of  the 
former  issue  made  the  total  of  circulating  notes  $80,000,000. 

This  was  without  doubt  an  unfortunate  solution  of  the  agitation 
resulting  from  the  financial  stringency.  Exchange  was  almost  at 
par  and  the  same  financial  limitation  that  was  felt  in  the  middle  of 
that  reaction,  so  favorable  to  economic  life,  would  have  brought 
as  a  consequence  the  easy  operation  of  the  convertible  fund,  and 
in  this  way  the  circulating  medium  would  have  received  that  elastic- 
ity which  the  legal  tender  lacks.  Only  in  the  presence  of  a  certain 
necessity  for  circulation  and  with  exchange  at  par,  does  a  very  favor- 
able occasion  present  itself  to  sell  paper  at  a  par  with  gold.  In 
1904  the  situation  was  such  that  without  an  increase  in  the  issue, 
even  if  the  convertible  fund  had  not  been  created,  gold  would  have 
been  circulating  at  par  with  the  notes,  thus  completing  the  circulat- 
ing medium  that  was  beginning  to  be  too  inelastic  for  the  new 
situation. 

The  procedure  of  increasing  the  note  issues  on  one  side  and, 
on  the  other,  of  depositing  in  the  banks  the  sums  issued,  had  the 
effect  of  lighting  the  fire  of  stock  speculation.  In  contrast  to  the 
quiet  and  consistent  course  along  which  the  settlement  of  the  old 
crisis  had  been  going  up  to  the  present  time,  the  increase  in  the 
note  issues  and  the  fiscal  deposits  in  the  banks  lent  wings  to  the 
violent  speculative  movement  which  ushered  in  the  new  period  of 
prosperity  and  progress.  In  "El  Ferrocarril"  of  December  2,  1904, 
I  wrote  the  following  in  regard  to  this  question:  "It  cannot  be 
denied  that  that  was  a  very  favorable  occasion  for  the  re-establish- 
ment of  exchange  at  par  without  injuring  debtors  or  creditors.  But 
we  must  not  deceive  ourselves.  This  method  that  so  clearly  pre- 
sented itself  six  months  ago  to-day  meets  new  obstacles,  which 
have  since  intervened, — and  it  is  hard  to  admit  it — in  consequence 
of  the  project  of  Minister  Sr.  Ibanez.'  In  truth  this  project  was 
the  starting  of  the  real  metamorphosis  in  the  turn  of  business;  it 
was  the  falling  of  a  curtain  separating  two  acts  in  the  economic 
life  of  the  country.  Although  the  past  crisis  had  disappeared,  the 
raven  and  other  birds  of  prey  were  still  flying  over  their  camp  of 
spoliation,  but  a  more  promising  outlook  was  now  clearly  perceived. 
The  nitrate  business  promised  a  magnificent  future  and  in 
Magallanes  a  new  field  of  production  had  opened  up. 

» Project  of  Issue, 

(688) 


The  Monetary  System  of  Chile  ill 

"The  reaction  commenced  gradually  but  on  a  quite  solid  basis. 
The  appearance  of  the  scheme  of  the  government  came  to  hurry  the 
evolution  and  to  convert  it  into  an  unbridled  speculation.  A  few 
years  ago,  in  1894,  the  financial  policy  of  the  country  went  to  the 
other  extreme;  in  the  midst  of  a  very  grave  economic  crisis  and  of 
international  difficulties  the  monetary  conversion  was  effected,  pro- 
ducing a  high  valuation  of  coin  and  all  the  consequent  effects  of 
restriction.  To-day,  in  1904,  in  the  midst  of  one  of  the  most 
flourishing  movements  of  prosperity  that  the  country  could  have, 
the  issue  is  increased,  the  government  thus  contributing  in  a  most 
efficient  way  to  separate  us  from  the  free  circulation  at  par  of 
outstanding  notes."  In  the  same  article  mentioned  above,  I  said 
the  following:  "All  this  comes  not  from  the  fact  that  the  paper 
is  in  itself  a  detestable  instrument  of  circulation  but  from  the 
detestable  use  that  is  made  of  the  paper  money." 

With  this  policy  of  increasing  the  issue,  one  of  the  most  favor- 
able occasions  that  could  present  itself  in  order  to  regularize  a 
circulation  of  our  paper  money  at  par  was  lost,  and  it  contributed 
to  favor  the  exchange  of  paper  money  for  coin  in  its  most  dangerous 
form,  upsetting  the  true  movement  of  prosperity  that  was  moving 
along  on  a  most  solid,  though  less  violent  basis.  During  the  month 
of  May,  1905,  after  the  speculative  fever  had  reached  its  height,  fol- 
lowing the  most  unheard-of  development  and  abuse  of  credit,  a 
sort  of  panic  made  itself  felt,  which  resulted  in  the  failure  of  many 
speculators.  The  banks  restricted  credit  and  speculation  was 
thus  paralyzed.  It  became  impossible  to  form  new  companies,  and 
many  of  those  already  formed  commenced  to  fail.  Exchange 
quotations  fell  sharply. 

The  reaction  continued  in  this  manner  for  a  few  months,  but 
soon  new  symptoms  of  improvement  were  noticed.  It  is  true  that 
on  the  one  hand  the  speculative  fever  and  the  abuse  of  credit  were 
able  to  bring  very  grave  consequences  to  the  general  condition  of 
business,  but  it  is  also  true  that  there  was  actual  and  effective 
Vv'ealth  in  many  of  the  newly  formed  enterprises,  and  this  wealth 
manifested  itself  sufficiently  to  prevent  the  appearance  of  a  new 
crisis.  The  evidences  of  revival  continued  and  new  companies  were 
created,  whose  securities  underwent  an  increase  in  value  similar  to 
that  of  the  older  securities. 

At  the  end  of  April,  1906,  the  banks  again  began  to  complain 

(689) 


112  TJie  Annals  of  the  American  Academy 

of  the  lack  of  currency.  A  decrease  in  deposits  was  noticed  which 
began  to  alarm  some  of  our  strongest  banks.  The  rumor  spread 
that  the  banks  would  even  have  to  close  their  doors  if  the  issue 
were  not  increased.  The  notes  on  deposit  in  all  the  banks  as  appears 
in  a  report  of  the  Minister  of  Finance  were : 

January  31,  1906  $34,335,219.06 

February  28,  1906  25,735,428.01 

May  31,  1906  22,228,408.22 

In  the  month  of  April  the  decrease  was  much  larger. 

Some  again  suggested  at  this  time  the  establishment  of  con- 
vertible funds,  with  the  power  of  issuing  notes  against  gold,  and 
the  government  respectfully  presented  the  plan  of  a  law;  but  as  the 
gold  was  now  at  a  greater  premium,  the  normal  operation  of  a 
scheme  for  supplying  the  market  with  the  cash  that  it  lacked  was 
not  so  easily  attainable. 

Comparing  the  situation  in  1906  with  the  one  that  existed  in 
1904,  we  find  that  in  1906  the  speculative  fever  and  the  abuse  of 
credit  had  not  gone  so  far,  so  that  it  was  much  easier  to  adopt  a 
monetary  financial  policy  of  resistance  to  the  increase  of  the  issues 
because  no  interests  were  bound  to  the  depreciation. 

This  policy  would  have  then,  in  1904,  tended  to  impede  the 
development  of  speculation,  which  afterwards  took  a  most  violent 
character. 

By  1906  circumstances  tended  unfavorably  to  the  scheme  of 
the  convertible  fund  as  a  solution  of  the  problem  of  financial 
stringency.  Besides  the  depreciation  of  the  notes,  which  hindered 
the  normal  operation  of  deposits — a  new  factor  presented  itself 
which  required  an  increase  in  the  issues — that  created  by  the 
unheard-of  development  given  to  credit  and  speculation.  To  this 
new  situation  many  interests  were  related. 

Congress  after  a  lively  discussion  in  April,  1906,  approved  a 
law  for  the  increase  of  $40,000,000  of  legal  tender  fiscal  notes.  This 
law,  as  the  preceding  ones,  also  provided  for  the  accumulation  of 
a  convertible  gold  fund  in  European  and  American  banks  as  a 
guarantee  for  the  paper  money.  Together  with  the  former  issues 
the  total  quantity  of  notes  had  now  reached  the  sum  of  $120,000,- 
000.  Following  are  some  quotations  of  the  fluctuations  of  prices  in 
the  bourse  of  Santiago: 

(690) 


Quotations  in 

Jan.,        Jan.,        Dec, 

1903         1904         1904 

135          156          \12 

Feb.. 
1905 
182 

Feb., 
1900 

202 

197          225          334 

4-15 

0 

131           127          202 

257 

« 

•  •  .       3,500      3,500 

10,000 

20,000 

The  Monetary  System  of  Chile  113 


Name  of  Compan  J^";-  J^"- 

*^  1 90 1  1902 

Bank  of  Chile   112  113 

Saltpetre  of  Antofagasta 106  190 

Sugar  refinery,  Vina  del  Mar  113  135 

Commercial   exchange    

Grazing    and    farming,    Chile- 
Argentine    . , 48        140        155 


In  these  quotations  we  refer  to  a  few  stocks  of  very  impor- 
tant enterprises.  The  stock  quotations  register  in  this  period  hun. 
dreds  of  security  issues  formed  over  night  by  speculation. 


Table  of  Banking  Movements  Compiled  from  Figures  Furnished  by  the 

Central  Office  of  Statistics. 

Year  ending  Fund  in  Advances  in  money, 

Dec.  31.                       Capital  paid.  reserve.  Deposits.                      values,  etc. 

1901'     42,120,007  4,428,563  94,567,415            106,700,359 

1902      53,360,110  5,124,603  141,342,115            173,101,964 

1903      54,739,690  5,368,264  136,285,501            162,860,516 

1904      65,352,047'  8,619,629  171,085,232           201,691,651 

1905'     76,047,683  11,134,450  294,107,369          296,964,488 


It  is  well  to  observe  that  it  is  not  the  entire  amount  of  these 
security  issues  showing  the  formation  of  new  corporations  which 
represents  new  capital,  for  often  corporations  were  formed  .on  the 
basis  of  existing  enterprises  that  belonged  to  individual  owners  or 
companies,  and  the  corporations  which  increased  their  capital  are 
also  included  in  these  figures.  Thus  a  mining  company  that  was 
established  in  1900  with  $1,500,000  capital,  was  bought  up  in  1905 
by  another  corporation  having  $6,000,000  capital,  with  only  the 
expense  of  $1,500,000  more  capital.  Other  corporations  only  col- 
lected part  of  their  capital,  but  appeared  to  be  authorized  to  act  on 
the  basis  of  their  total.  At  any  rate  the  table  is  indicative  of  the 
speculative  movement  and  the  stock  fever. 

'There  was  an  alteration  of  their  stock  in  those  companies. 

■^  In  this  balance  tlie  foreign   banks  are   not   represented. 

*  In   these   fiiiures   the  funds   of  future   dividends   of   stockholders   are   Included. 

»TLe  data  for  this  year  are  taken  from  the  chart  of  the  Secretary  of  Treasury. 

(691) 


114 


The  Annals  of  the  American  Academy 


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(692) 


The  Monetary  Systoji  of  Chile  115 

This  table  shows  the  foreign  commerce.^" 

Year.  Imports.        Exports. 

1901  $139,300,766      $171,844,976 

1902  132,428,204  185,879,965 

1903  142,470,509  194,279,672 

1904  157,15-^,080  215,997,784 

1905  188,596,418  265,209,192 

1906  225,265,516  271,448,216 

To  resume,  it  may  be  said  that  never  had  Chile,  in  its  different 
periods  of  economic  prosperity,  passed  through  one  that  could 
equal  the  period  that  included  those  years.  By  coincidence,  many 
facts  tending  to  maintain  this  movement  were  united ;  the  good  con- 
dition of  the  price  of  salt,  the  rise  in  the  price  of  copper,  of  tin 
and  also  of  wool;  the  splendid  markets  that  the  new  salt  and  min- 
ing enterprises  gave  to  agriculture  and  national  industries,  etc.  The 
prosperous  and  flourishing  condition  of  business  in  North  America 
and  Europe,  which  notably  contributed  to  maintain  and  assist  the 
enterprises  that  were  formed  with  the  easy  access  to  credit  and 
capital,  and  even  to  promote  these  enterprises  abroad. 

To  all  these  facts  was  added  the  policy  of  increasing  the  note 
issues,  and  the  deposit  of  fiscal  funds  in  the  banks,  which  tended 
to  encourage  speculation,  responsible  later  for  so  many  failures. 

The  increase  in  prosperity  continued  in  this  manner  until 
August  16,  1906,  when  the  earthquake  of  Valparaiso  occurred, 
giving  a  terrible  blow  to  the  economic  vitality  of  the  country  and 
causing  enormous  damage  over  a  large  territory. 

The  earthquake  was  the  first  event  that  came  to  interrupt  the 
advance  in  prosperity,  though  it  is  true  that  neither  its  effects  upon 
the  exchange  rate  nor  upon  the  quotations  of  securities  upon  the 
bourse  were  felt  at  once  with  any  great  intensity.  The  premium 
of  gold,  which  was  around  twenty-eight  per  cent  before  the 
earthquake  did  not  exceed  thirty-two  per  cent  until  two  months 
later. 

III.     The  Period  of  Prosperity  Gives  Way  to  One  of  Panic 

Symptoms  of  difficulties  in  economic  conditions  were  felt  as 
early  as  the  end  of  1906  in  the  principal  centers  of  the  great  busi- 
ness  activity   of   previous   years.      A'alparaiso    and    Santiago   were 

10  The  commerce  of  the  province  of  Tcana  and  the  territories  of  Magallanea  are 
not  included. 

(693) 


ii6  The  Annals  of  the  American  Academy 

the  markets  where  most  of  the  big  business  enterprises  centered 
and  also  where  the  grave  consequences  of  the  forthcoming  economic 
difficulties  were  felt  with  the  greatest  violence. 

People  again  began  to  talk  about  monetary  stringency,  business 
no  longer  found  the  former  facilities,  stock  quotations  on  the 
bourse  began  to  fall  and  the  sales  of  stock  and  bonds  met  with 
greater  and  greater  obstacles. 

The  development  of  the  nitrate  business  was  made  very  difficult 
through  the  steps  taken  by  the  government  against  the  incorporation 
of  most  of  the  new  enterprises,  which  served  as  the  basis  of  the 
dealings  in  securities  during  the  period  of  prosperity,  and  which 
were  the  principal  nucleus  of  those  nitrate  works  which  belonged 
to  citizens  of  the  country.  The  nitrate  industry  of  Chile,  the 
exportation  of  which  exceeds  the  amount  of  two  hundred  millions 
per  year,  is  the  basis  of  public  and  national  wealth. 

In  1907  the  economic  difficulties  increased,  always  being  local- 
ized, as  heretofore,  in  the  centers  of  Santiago  and  Valparaiso,  where 
the  difficulties  were  felt  with  the  greatest  intensity.  In  the  remain- 
der of  the  country  the  agricultural  situation  w^as  prosperous  and 
the  condition  of  the  nitrate  industry  was  also  satisfactory.  Copper 
brought  the  enormous  price  of  one  hundred  pounds  sterling  per  ton. 
In  a  word  the  staples  of  production  did  not  cause  any  anxiety.  The 
difficulties  had  their  beginning  in  the  lack  of  capital  to  form  and 
develop  the  unlimited  number  of  enterprises  w^hich  had  been  created 
in  such  a  short  space  of  time.  It  is  doubtless  true  that  the  founda- 
tions of  domestic  capital  were  insufficient  when  compared  with  the 
size  of  the  investments.  The  moment  had  arrived  in  which  the  great 
funds  of  capital,  to  which  many  had  unconsciously  contributed,  had 
to  be  disbursed ;  the  first  dividends  had  been  paid  without  difficulty, 
but  now  it  was  very  hard  to  accumulate  enough  money  for  a  like 
purpose.  Many  business  enterprises  without  a  solid  foundation, 
some  of  those  that  started  at  the  height  of  the  investment  fever, 
were  already  dead,  and  nobody  thought  of  attempting  to  resuscitate 
them.  They  had,  nevertheless,  left  behind  the  consequences  result- 
ing from  the  loss  of  great  capital  and  large  credits  which  had  been 
granted  them.  It  was  understood  that  many  of  the  vain  hopes 
entertained  about  certain  enterprises  w^ere  doomed  to  destruction, 
but  it  was  thought  that  the  bases  of  those  left  were  sufficiently 
strong  to  sustain  economic  prosperity. 

(694) 


The  Monetary  System  of  Chile  117 

In  this  year  of  1907,  while  Minister  of  Finance,  when  the  debate 
on  the  economic  situation  was  opened  in  Congress,  I  said  at  the 
session  of  June  20:  "VVe  undertook  to  build  up  larger  enterprises 
than  domestic  capital  could  support.  But  as  this  is  not  the  moment 
to  study  what  we  have  done  in  the  past,  we  must  consider  only  the 
method  by  which  we  may  remedy  the  evil,  because  together  with 
many  enterprises  which  were  formed  without  any  basis  whatsoever 
there  are  others  which  rest  on  a  solid  foundation,  capable  of  con- 
tributing to  our  national  prosperity." 

I  referred  primarily  to  the  nitrate  industry  in  which  many 
millions  were  invested  and  in  which  were  felt  difficulties  due  to 
lack  of  funds  to  finish  and  complete  the  new  and  valuable 
installations  created. 

There  were  at  this  time  two  dominant  opinions  among  those 
interested  in  economic  questions.  A  few  considered  that  the  govern- 
ment ought  not  to  intervene  in  the  matter,  leaving  everything  to 
the  initiative  of  the  individuals,  and  this  had  been  also  the  opinion 
of  my  predecessor  in  the  ministry;  the  greater  part,  partisans  of 
governmental  intervention,  again  maintained  that  it  was  necessary 
to  increase  the  note  issue.  I  did  not  belong  to  either  of  these  par- 
ties, but  thought  the  government  could  lend  its  very  valuable  aid 
to  the  amelioration  of  the  economic  situation  and  ought  to  interest 
itself  in  so  doing;  I  did  not  believe,  however,  that  the  government 
ought  to  have  recourse  to  a  new  note  issue.  I  indicated  at  the 
time  the  only  remedy  which  would  readjust  business.  Since  the 
malady  consisted  in  the  lack  of  capital,  it  was  necessary  to  provide 
it,  and  I  proposed  to  bring  back  to  the  country  the  conversion* 
funds  which  were  being  accumulated  in  European  banks  at  three 
per  cent  interest,  thinking  it  would  be  best  to  buy  with  them  short- 
term  national  bonds,  including  nitrate  bonds,  as  is  done  with  the 
"debentures"  in  London. 

It  was  impossible  to  think  of  conversion,  because  the  paper 
peso  was  greatly  depreciated;  on  that  account  it  was  necessary  to 
wait  for  a  better  opportunity  to  re-establish  exchange  at  par.  Noth- 
ing would  be  lost,  therefore,  if  these  funds  were  invested  in 
bonds.  In  order  not  to  withdraw  these  funds  from  the  object  for 
which  they  were  intended,  gold  bonds  would  be  created,  that  is 
to  say,  debts  which  the  nitrate  operators  or  the  farmers  would  have 
to  make  payable  in  gold  and  the  products  of  which  in  interest  and 

(695) 


ii8  The  Annals  -of  the  American  Academy 

amortization  would  accumulate  in  gold,  thus  re-establishing  the 
fund  for  the  conversion. 

The  short  term  nitrate  paper  bond,  say  from  eight  to  ten  years, 
for  example,  lent  itself  very  well  to  this  operation,  and  as  the  prod- 
uct of  these  industries  is  for  exportation  it  was  convenient  for 
those  promoting  such  a  business  to  make  their  debts  payable  in  gold. 
To  sunnnarize,  I  thought  that  the  only  way  to  soften  the  effects  of 
the  crisis  which  presented  itself  in  such  alarming  aspects  was  to 
secure  capital  for  the  development  of  the  national  enterprises  which 
needed  it.  As  the  government  had  at  the  time  a  good  sum  of  money 
inactive  in  foreign  banks  (more  than  70,000,000  gold  pesos  worth 
i8d.)  the  intervention  of  the  government  could  have  resolved  itself 
to  the  restoration  of  these  funds  to  the  country  as  long  as  the  crisis 
lasted.  If  this  were  not  done,  the  only  alternative  was  that  of  a 
loan,  but  it  was  more  economical  to  use  the  funds  which  were  placed 
abroad  at  an  interest  of  three  per  cent  for  this  purpose  leaving  the 
question  of  a  loan  for  the  time  in  which  the  paper  should  be  ex- 
changed for  gold  money. 

To  this  way  of  settling  the  affair,  the  opinions  of  many  leading 
men  were  opposed.  It  was  generally  considered  that  it  was  better 
to  increase  the  issue  of  paper  money  guaranteed  with  gold  in 
Europe  instead  of  touching  this  conversion  fund,  and,  with  this 
object  in  view,  those  that  called  themselves  enemies  of  paper  issues 
proposed  to  contract  a  loan  abroad,  to  increase  with  it  the  conversion 
fund  deposited  in  Europe,  and  to  issue  here  in  the  country  the  corre- 
sponding paper  notes. 

Which  was  the  way  that  would  have  carried  us  easier  to  the 
desideratum  of  arriving  at  a  currency  of  paper  money  at  par  with 
gold,  the  increasing  of  a  conversion  fund,  increasing  at  the  same 
time  issues  of  legal  tender,  or  the  avoiding  of  new  issues  by  placing 
at  a  certain  rate  of  interest  in  the  country  the  funds  set  aside  for 
the  conversion?  It  is  clear  that  the  second  way  would  more  nearly 
avoid  a  still  greater  depreciation  of  the  legal  tender  note,  and  this 
is  the  only  way  in  which  we  could  have  carried  the  currency  at  par. 
Our  notes  w^ere  not  then  depreciated  because  our  government  had 
not  funds  enough  to  attend  to  their  conversion.  The  government 
had  sufficient  means  to  establish  either  the  exchange  at  any  time, 
or  a  bank  for  conversion,  like  that  of  the  Argentine  Republic; 
but  the  low  international  exchange  or  the  high  premium  of  gold  was 

(696) 


The  Monetary  System  of  Chile  119 

opposed  to  this.  In  other  words,  the  currency  at  par  of  the  legal 
bill  could  not  be  re-established,  because  it  would  have  produced 
an  economic  panic  by  thus  raising  suddenly  the  monetary  unit; 
but  on  no  account  was  this  due  to  a  lack  of  funds.  Each  increase 
in  the  premium  on  gold  was  a  new  obstacle  to  a  re-establishment  of 
the  normal  currency  of  the  legal  tender  note  at  par  with  gold  and 
it  was  useless  to  have  government  funds  ready  for  the  conversion 
if  further  depreciation  of  these  notes  was  inevitably  coming  to 
prevent  such  a  conversion. 

International  exchange  was  already  as  low  as  twelve  pence 
per  peso,  the  value  at  par  being  eighteen  pence,  and  it  was  seen 
that  it  would  still  decrease  in  value,  and  it  can  be  seen  that  any 
new  issue,  even  if  guaranteed  by  gold  deposits,  made  more  and 
more  unlikely  the  prospect  of  securing  in  the  near  future  a  cur- 
rency with  a  rate  of  par  between  the  peso  note  and  the  gold  peso. 
But  this  was  of  small  moment,  as  everybody  was  obstinately  in 
favor  of  the  guaranteed  note;  just  as  if  the  sole  factor  of  the  value 
of  the  note  in  relation  to  gold  was  the  guaranty  that  it  could  be  con- 
verted into  specie,  forgetting  that  the  depreciation  of  the  legal 
tender  note  meant  as  much  as  a  declaration  that  although  there  was 
a  possibility  of  redeeming  it  the  government  would  never  be  able 
to  fulfil  this  obligation. 

One  of  the  characteristics  of  the  situation  was  the  continuous 
fall  of  the  rate  of  international  exchange  or  the  increase  in  the 
premium  on  gold,  a  situation  which  was  derived  from  a  constant 
demand  for  bills  of  exchange,  which  had  been  created  by  the  new 
business  enterprises,  and  in  part  by  the  earthquake.  The  nitrate 
works  had  to  pay  for  machinery  purchased  abroad,  and  this  was 
also  true  of  the  numerous  new  smelting  works.  Chileans  had  also 
bought  up  valuable  foreign  property,  such  as  tin  mines  in  Bolivia, 
and  agricultural  lands  in  the  Argentine  Republic  and  the  necessity 
of  paying  for  these  acquisitions  or  of  working  them  was  naturally 
shown  in  constant  demands  for  bills  of  exchange. 

It  can  be  seen  consequently  that  the  paper  note  was  an  instru- 
ment of  currency  which  was  insufficient  to  satisfy  international  obli- 
gations, and  the  solution  suggested  of  increasing  the  paper  issue 
could  not  satisfy  the  necessities  arising  from  the  lack  of  capital. 

If  it  were  thought  to  solve  the  problem  of  the  lack  of  capital 
by  means  of  a  new  issue,  it  is  evident  that  the  danger  would  be 

(697) 


120  The  Annals  of  the  American  Academy 

created  of  increasing  the  premium  on  gold,  which  at  the  time  was 
already  sufficiently  high. 

I  do  not  wish  to  give  the  impression  that  I  believe  that  every 
increase  of  an  issue  of  paper  money  is  always  accompanied  by  its 
depreciation  in  relation  to  gold,  but,  there  are  evidently  indirect 
relations,  dependent  upon  circumstances,  which  may  cause  a  depre- 
ciation in  relation  to  gold  as  a  consequence  of  an  increase  of  paper 
issues. 

In  the  present  instance,  it  is  evident  that  if  paper  money  were 
given  to  those  who  had  to  cancel  obligations  abroad,  they  would 
have  to  purchase  bills  of  exchange,  thus  producing  a  fall  in  the  rate 
of  international  exchange.  On  other  occasions,  as  for  example  in 
1898,  the  announcement  of  a  new  issue  produced  a  fall  in  the  rate 
of  exchange  through  other  reasons;  the  bad  state  of  our  foreign 
relations  had  filled  people  with  distrust,  further  depreciation  was 
feared,  and  naturally  a  great  demand  for  bills  of  exchange  was 
felt.  These  are  examples  which  go  to  show  how  an  increase  of 
paper  issues  can,  according  to  circumstances,  have  a  direct  effect 
upon  international  exchange. 

"If  we  now  set  aside  international  exchange  and  simply  look  at 
what  we  might  call  the  internal  value  of  our  monetary  unit,"  I 
said,  as  Minister  of  Finance,  to  the  Chamber  of  Deputies,  "a 
value  which  is  reflected  in  pjices  which  have  no  relation  to  impor- 
tation, as  rent,  salaries,  prices  of  natural  products,  properties,  etc., 
etc.,  we  can  establish,  without  recurring  to  voluminous  statistics, 
the  fact  that  there  is  a  great  decrease  in  the  purchasing  power  of  our 
money,  in  other  words,  the  value  of  our  money  has  decreased.  It 
is  true  that  in  proportion  to  the  increase  of  prices  the  prosperity 
of  business  has  increased  and  has  come  to  contribute  to  the  demand 
of  merchandise  and  to  the  increase  of  wages.  Do  not  imagine  there- 
fore that  I  believe  that  the  only  cause  for  this  phenomenon  is  the 
decrease  in  value  of  our  legal  bill." 

"What  would  be  the  result  of  a  new  issue  on  the  internal  value 
of  our  peso?  The  old  quantitative  theory,  according  to  which  every 
increase  of  the  amount  of  currency  would  have  to  be  followed  by 
a  proportional  decrease  of  its  value,  is,  it  is  true,  no  longer  held 
in  modern  economic  science.  It  cannot  be  said,  for  example,  as 
stated  by  Courcelle  Seneuil,  that  if  an  issue  is  increased  from  100 
to    150   the   value   of   the   bill   will    decrease   one-third;   but   it   is 

(698) 


The  Monetary  System  of  Chile  121 

also  true  that  the  underlying  principle  of  this  theory  still  has  to 
be  taken  into  consideration,  and  it  is  the  one  which  establishes 
that  it  is  impossible  constantly  to  increase  the  issues  without  decreas- 
ing the  value  of  the  bill  or,  in  other  words,  that  the  increase  of 
paper  issues  always  carries  with  it  a  tendency  to  decrease  the 
value  of  the  money." 

"It  is  necessary  for  us  to  remember  in  connection  with  the 
scarcity  of  currency  which  we  note  to-day,  that  as  the  value  of 
our  money  decreases,  even  if  we  increase  the  paper  issues,  the 
feeling  of  stringency  w^ould  continue  to  increase,  because  with  the 
decrease  of  the  money  the  necessities  which  we  could  before  satisfy 
with  100  pesos  would  have  to  be  satisfied  with  120.  This  we  have 
seen  has  happened  during  the  last  few  months,  for  we  must  remem- 
ber that  a  crisis  and  monetary  stringency  may  be  produced  even 
under  the  regime  of  a  paper  currency,  because  if  the  increase  of 
paper  issues  w^ere  always  the  remedy  for  such  situations,  this 
method  would  possess  the  valuable  property  of  quenching  all  these 
irregularities  of  economic  life.  Let  us  remember,  for  example, 
that  the  Argentine  Republic  became  involved  in  1890  in  a  great  eco- 
nomic crisis,  although  it  was  under  the  regimen  of  legal  tender  bills, 
and  although  the  value  of  the  bills  w^as  considerably  decreased  a 
great  many  cases  of  bankruptcy  and  business  liquidation  occurred, 
the  prices  of  properties  increased,  interest  on  loans,  etc.,  went  up, 
and  in  a  word,  all  the  characteristics  of  a  great  panic  w'ere  present." 

Although  I  insisted  that  the  ideas  proposed  by  me  should  be 
followed,  the  resistance  was  so  great,  on  the  part  of  the  executive 
against  the  bringing  into  the  country  of  the  funds  deposited  in 
Europe,  and  on  the  part  of  Congress  against  the  same  plan  and  in 
favor  of  the  increase  of  the  paper  issue,  that  I  convinced  myself 
of  the  impossibility  of  putting  through  my  plans.  I  attempted  to 
retire  from  the  cabinet,  but  the  desire  to  serve  my  country  with 
a  program  which  I  thought  w^as  convenient  and  sane,  made  me 
continue  in  the  cabinet,  on  condition  that  a  plan  based  on  those  same 
ideas  be  adopted,  even  if  the  funds  deposited  in  Europe  should  be 
left  untouched.  The  plan  on  which  the  government  came  to  an 
agreement  consisted  in  the  following:  In  accordance  with  the 
dominant  idea,  it  was  declared  that  the  government  considered  it 
expedient  to  intervene  in  the  economic  question,  and  that  it  would 
adopt  all  necessary  measures  to  remedy  the  situation. 

(699) 


122  TJic  Annals  of  the  American  Academy 

As  the  one  remedy  which  is  indispensable  in  such  disorders 
of  the  economic  organism  is  capital,  money  of  international  value, 
and  not  issues  of  paper  money,  it  was  decided  to  discontinue  the 
remittance  of  the  funds  which  were  sent  every  month  to  Europe 
to  be  immobilized.  The  proceeds  of  these  funds,  which  were  not  to 
be  sent  to  Europe,  and  of  a  foreign  loan,  would  be  placed  on  the 
market  together  with  some  other  gold  certificates  which  were  at  the 
disposal  of  the  government;  and  in  order  to  adopt  a  just  and  appro- 
priate method  for  handling  these  loans,  there  being  no  state  bank  and 
it  being  impossible  to  deposit  more  funds  in  the  national  banks,  it  was 
decided  to  buy  bonds  upon  a  territorial  mortgage  and  nitrate  bonds. 

Though  in  former  years  of  prosperity,  and  especially  in  1904, 
as  I  have  proved  already,  the  economic  evolution  could  have  been 
brought  about  without  the  intervention  of  government  capital,  to-day 
things  were  changed.  A  new  and  terrible  panic  was  menacing  us 
and  we  could  not  abandon  the  prosperity  offered  by  the  nitrate 
enterprises  and  the  new  agricultural  enterprises  and  others  which 
possessed  a  real  and  positive  basis  of  wealth.  Then  also  through 
the  initiative  of  the  government  a  bank  or  rather  a  mortgage-loan 
institute,  to  facilitate  the  loans  of  the  nitrate  enterprises,  was  created, 
with  bonds  or  debentures  of  short  term.  The  mortgage-loan  insti- 
tute had  been  used  for  many  years  with  great  success  as  a  govern- 
mental institution,  and  this  new  step  was  taken  in  favor  of  the 
national  nitrate  industry. 

Once  this  plan  had  been  agreed  upon,  the  discussion  of  it  began 
in  Congress.  The  great  majority  in  Congress  were  partisans  of 
an  increase  of  the  paper  issue,  and  it  was  soon  seen  that  it  was 
impossible  to  resist  this  majority  without  making  the  country  endure 
the  heavy  consequences  of  a  conflict  between  the  executive  and 
Congress.  The  legislative  measures  adopted  after  long  discussions 
in  parliament  were  the  following: 

1.  The  payment  of  importation  duties  in  gold  was  suppressed. 
This  measure  stopped  anomalous  circulation  of  specie  within  the 
circulation  of  depreciated  paper  money. 

2.  It  was  arranged  that  notes  be  issued  in  exchange  for  gold, 
that  is  to  say,  that  a  note  be  given  in  exchange  for  each  gold  peso 
of  eighteen  pence  deposited. 

This  measure  had  no  importance  at  this  time,  because  of  the 
depreciation  of  the  paper  peso  in  relation  to  gold,  but  it  was  adopted 

(700) 


The  Monetary  System  of  Chile  123 

as   an   inoffensive  measure   to  be   applied  when   exchange   should 
improve.^^ 

3.  The  nitrate  mortgage-loan  institute  was  created  for  the  issue 
of  special  bonds  or  debentures  for  this  industry. 

4.  The  accumulation  of  funds  for  the  conversion  of  legal 
tender  notes  in  Europe  was  suspended ;  the  government  was  author- 
ized to  complete  this  fund  by  means  of  a  loan  when  the  conversion 
of  the  notes  should  be  made. 

5.  An  increase  of  the  legal  tender  notes  was  made  to  the 
amount  of  $30,000,000,  even  against  the  opposition  of  the  executive. 
This  sum  was  created  for  the  purchase  of  mortgage  bonds. 

6.  The  executive  was  authorized  to  contract  a  loan  of  three 
million  pounds  sterling  to  be  devoted  later  to  the  construction  of 
public  works,  to  be  invested  meanwhile  in  bonds. 

The  purpose  of  this  loan  was  to  avoid  a  still  greater  deprecia- 
tion of  the  paper  money,  by  placing  in  the  country  a  great  amount 
of  bills  of  exchange  and  placing  these  funds  for  some  time  in  the 
country  through  the  purchase  of  bonds.  It  was  understood  by 
many  that  with  the  issuance  of  only  paper  money,  international 
exchange  would  continue  to  fall,  because  great  sums  of  money  had 
constantly  to  be  sent  abroad.  As  it  can  be  seen,  the  legislative 
measures  adopted  by  Congress  did  not  correspond  to  the  plan  or 
project  approved  by  the  government.  Nevertheless  we  did  all  we 
could  to  obtain  the  object  which  we  had  in  view  as  a  remedy  for 
the  panic,  even  without  going  beyond  the  legislative  measures 
adopted,  there  being  in  the  law  sufficient  material  from  which  a 
solution  of  the  situation  could  be  worked  out. 

In  this  I  met  with  serious  opposition  in  the  government  and 
after  my  resignation  from  the  ministry,  the  program  proposed  by  me 
was  completely  abandoned.  The  foreign  loan  was  not  contracted 
for  the  whole  amount,  and  it  may  be  said  that  the  issue  of  $30,000,000 
was  the  only  means  adopted  for  the  creation  of  money-capital. 

At  the  end  of  1907  it  was  seen  that  the  general  economic  sit- 
uation w^as  getting  worse  and  worse,  and  the  panic  was  approaching 
with  disastrous  outward  manifestations.     The  panic  in  the  United 

'1  Tho  reason  for  choosing  this  occasion,  which  was  so  inopportune,  to  provide 
for  the  issuance  of  notes  against  eold  was  that  a  group  in  Congress  tried  to  create 
a  Bank  of  Issue  ag'ainst  mortgage  honds,  so  that  everybody  who  deposited  bonds 
could  obtain  bills.  The  government  then  declared  that  It  would  permit  Issue  only 
against  gold  and  not  against  bonds. 

(701) 


124  The  Annals  of  the  American  Academy 

States  and  its  echo  in  Europe  helped  to  complicate  the  situation  in 
Chile.  Strong  foreign  houses  and  banks,  which  had  capital  in  the 
country,  began  to  demand  the  payment  of  their  credits.  This  and 
the  numerous  debts  contracted  here  in  previous  years,  as  a  result 
of  the  many  new  enterprises  which  had  recently  been  undertaken, 
made  the  question  a  very  serious  one. 

Following  the  panic  in  the  United  States  and  Europe  the  situa- 
tion in  Chile  became  alarming.  International  exchange  fell  rapidly, 
and  numerous  business  houses  went  into  bankruptcy  and  insolvency, 
and  these  produced  the  consequent  business  panic.  The  effects  of 
the  panic  were  felt  principally  in  Valparaiso  and  Santiago,  which 
have  been  the  great  business  centers  of  late  years.  Few  of  the 
numerous  securities  quoted  on  the  bourse  in  previous  years  now 
found  buyers.  The  risky  enterprises  which  had  been  formed  for 
the  sole  purpose  of  speculation  had  disappeared  some  time  before, 
and  the  shares  of  the  stable  enterprises  began  to  suffer  heavy  losses 
in  their  prices.  Happily  the  panic  did  not  yet  extend  to  agriculture, 
but  agriculture  was  not  sufficient  to  heal  the  gaping  wounds  left  by 
the  new  situation. 

The  force  of  circumstances  had  compelled  the  government  to 
recognize,  although  somewhat  too  late,  the  gravity  of  the  situation, 
of  the  nitrate  enterprises,  and  especially  of  recently  discovered 
nitrate  in  Atacama.  With  the  funds  at  its  disposal  and  through  our 
principal  bank  it  had  tried  to  make  loans  to  these  enterprises,  and 
keep  them  from  stopping  their  works.  But  this  method,  had  not 
only  come  too  late,  but  had  also  had  all  the  disadvantages  of  a 
measure  which  was  poorly  studied  and  applied,  and  which  had  not 
been  carried  out  with  a  general  spirit  of  justice  and  equity.  To-day 
it  is  being  recognized  that  the  policy  of  placing  national  funds  in 
nitrate  bonds  would  not  only  have  been  efficacious,  but  would  have 
been  more  just  as  a  protection  to  this  important  branch  of  the 
national  industries,  which  from  a  financial  point  of  view  produces 
more  than  fifty  per  cent  of  the  public  income  of  the  nation,  while 
of  the  total  amount  of  our  exportation  it  produces  eighty  per  cent. 
As  far  as  the  nationalization  of  this  industry  is  concerned  our 
policy  could  not  have  been  worse. 

What,  it  may  now  be  asked,  ought  to  be  our  financial  policy  in 
the  future?    In  the  year  1910/-  the  term  fixed  for  the  redemption  of 

1'  Thia  paper  was  written  at  the  close  of  1909. 

(702) 


The  Monetary  System  of  Chile  125 

the  legal  tender  bills  by  gold  pesos  of  eighteen  pence  will  cease. 
Since  the  legal  tender  note  is  now  considerably  depreciated  in  rela- 
tion to  the  gold  peso,  and  considering  the  long  time  in  which  the 
contracts  have  been  adapting  themselves  to  this  situation,  it  is 
easy  to  understand  that  it  would  not  be  possible  to  redeem  the  cur- 
rency in  1 9 10  without  greatly  endangering  the  development  of  busi- 
ness. If,  as  far  as  the  means  at  the  disposal  of  the  government  are 
concerned,  the  operation  were  possible,  considering  the  effects  it 
would  have  on  the  development  of  business,  on  credit,  on  the  fulfil- 
ment of  contracts  and  on  the  stability  of  banks,  it  can  be  said  with 
certainty  that  grave  dangers  would  arise  which  ought  to  be  avoided. 
For  the  re-establishment  of  the  metallic  currency  an  occasion  must 
be  selected  which  ought  to  correspond  to  a  period  of  actual  economic 
prosperity,  as  was  for  example  that  of  1904.  It  is  known  with 
what  distrust  the  public  would,  after  a  complete  failure  in  the  year 
1898,  receive  the  conversion  of  the  legal  tender  notes.  It  is  there- 
fore necessary  to  carry  out  such  an  operation  in  times  of  prosperity, 
when  the  wounds  of  the  present  crisis  are  healed,  and  when  new 
vigor  and  life  animates  the  financial  situation  of  the  country. 

It  can  be  seen  therefore  that  a  conversion  at  par  or  at  eighteen 
pence  is  not  likely  to  be  carried  out,  and  therefore  the  authorities 
ought  to  begin  to  think  of  setting  a  lower  rate  of  exchange  for  the 
gold  which  would  replace  the  notes ;  this  rate  could  be  fixed  for 
example  at  twelve  pence.  But  this  operation  would  have  the  dis- 
advantage of  reducing  still  more  the  value  of  our  peso,  and  for  this 
public  opinion  with  us  does  not  as  yet  seem  to  be  prepared.  Tf 
the  depreciation  lasts  for  some  years  longer  a  unanimous  opinion 
on  this  point  could  perhaps  be  secured.  It  might  be  urged  in  favor 
of  this  measure  that  it  would  be  better  to  have  a  fixed  value  for 
the  peso  at  twelve  pence  instead  of  a  nominal  value  of  eighteen 
pence,  which  in  reality  changes  continually  in  its  relation  to  gold 
and  costs  to-day  only  nine  pence.  It  was  in  this  manner  that  the 
Argentine  Republic  settled  its  financial  difficulties  through  the  bank 
of  conversion.  But  even  in  this  case  better  times  would  have  to  be 
selected  for  the  operation,  as  was  done  in  the  Argentine  Republic. 
The  exchange  of  the  day  of  the  conversion  was  selected  for  the 
permanent  one  and  consequently  no  harm  was  done  to  debtors,  the 
operation  being  received  without  distrust,  as  would  happen  if  the 
exchange  selected  were  higher  than  the  actual  international  exchange. 
Our  exchange  to-day  being  as  low  as  nine  pence,  it  would  cause 

(703) 


126  The  Annals  of  the  American  Academy 

panic  and  unnecessary  trouble  to  raise  it  to  twelve  pence.  Our 
financial  policy  then  must  confine  itself  now  to  leaving  things 
as  they  are.  Let  us  wait  for  better  times  without  increasing  the 
paper  issues,  and  I  do  not  doubt  that  a  day  will  come  in  which  it 
will  be  sufficient  for  the  government  to  establish  the  exchange  of 
the  gold  and  legal  tender  note  at  par.  The  circulation  of  the  note  and 
gold  at  par  can  be  arrived  at  by  establishing  the  exchange  at  sight 
and  to  the  bearer;  and  here  where  the  people  are  accustomed  to 
the  notes  it  would  be  sufficient  to  leave  to  the  government  the  power 
of  making  issues.  In  this  case  we  would  have  gold  money, 
supplemented  by  paper  bills  which  would  circulate  at  par  with  the 
gold. 

The  solution  of  the  financial  difficulties  in  the  Argentine  Repub- 
lic with  the  bank  of  conversion  depends  upon  a  mixed  circulation 
of  gold  and  paper,  the  latter  being  exchangeable  at  sight  and  to 
the  bearer.  The  gold  does  not  circulate  as  it  does  in  Europe  or  the 
United  States,  that  is  to  say  as  in  those  countries  which  have  a 
gold  unit,  but  it  circulates  in  the  form  of  paper,  the  gold  being  left 
on  deposit  in  the  bank  of  conversion  and  its  coinage  being  thus 
avoided.  Both  solutions  are  similar,  but  both  must  be  established 
in  prosperous  times  and  when  the  wounds  of  the  present  situation 
are  healed — that  is  to  say,  when  they  would  not  produce  fluctuations 
dangerous  to  business. 

Let  us  devote  ourselves  at  present  to  effacing  the  difficulties 
of  the  present  situation,  and  let  us  work  for  the  development  of 
those  enterprises  which  constitute  the  basis  of  our  national  wealth. 
Let  us  take  those  measures  which  are  necessary  to  bring  about 
this  evolution,  and  when  the  wounds  are  healed,  the  solution  of  the 
financial  crisis  will  come  about  without  friction. 

Amount  of  Paper  Money  in  Circulation. 

Year.  Issue.  Total  in  circtilation. 

1898  $50,000,000      $50,000,000 

1899  50,000,000  50,000,000 

1900  50,000,000  50,000,000 

1901  50,000,000  50,000,000 

1902  50,000,000  50,000,000 

1903  50,000,000  50,000,000 

1904  30,000,000     80,000,000  (Law  of  Dec.  29) 

1905  30,000,000     80,000,000 

1906  40,000,000  120,000,000 

1907  30,000,000  150,000,000 

(704) 


The  Monetary  System  of  Chile 


127 


Premium  on  Gold. 


(Table  taken  from  the  quotations  of 

and  El  F 


the  bourse  as  published  in  El  Mercurio 
crrocarril.) 


Year. 
1898 
1898 
1898 
1898 
1898 
1898 
1898 
1898 
1898 
1898 
1898 
1898 
1899 
1899 
1899 
1899 
1899 
1899 
1899 
1899 
1899 
1899 
1899 
1899 
1899 
1899 
1899 
1899 
1899 
1899 
1899 
1899 
1899 
1899 
1899 
1900 
1900 


Month, 

August  14 
August  IS 
August  17 
Sept.  10 
14 
10 
14 
31 
14 
30 
14 
31" 
14 
30 
14 
28 


Sept. 

Oct. 

Oct. 

Oct. 

Nov. 

Nov. 

Dec. 

Dec. 

Jan. 

Jan. 

Feb. 

Feb. 

March     14 

March    31 

April       10 


April 
May 
INIay 
June 
June 

July 

July 


14 
14 
31 
14 
30 
14 
31 


August  14 
August  30 
Sept.       14 


Sept. 

Oct. 

Oct. 

Nov. 

Nov. 

Dec. 

Jan. 

Jan. 


30 
14 
31 
14 
30 
14 
2 

15 


Premium  on 
gold  in  %. 

30 

46 

37 

25 

40 

26y2 

325^ 

34 

35'/4 

38 

39 

44 

49 

39'/^ 

38.80 

35 

32 

29 14 

32 

24>4 

2214 

24 

18 

19 

18 

iS'A 

15'/^ 

16/2 

i6y2 

ly'A 

19 

23^ 

2014 

16 

14 

9 

ioy2 


Year. 

1900 
1900 
1900 
1900 
1900 
1900 
1900 
1900 
1900 
1900 
1900 
1900 
1900 
1900 
1900 
1900 
1900 
1900 
1900 
1900 
1900 
1900 
1900 
190I 
190I 
I901 
1901 
I9OI 
190 1 
I901 
I901 
I9OI 
19OI 
I901 
19OI 
I9OI 
19OI 


Month. 

Jan. 

Feb. 

Feb. 

Mar. 

Mar. 

Apr. 

Apr. 

May 

May 

June 

Jime 

July 

July 

August 

August 

Sept. 

Sept. 

Oct. 

Oct. 

Nov. 

Nov. 

Dec. 

Dec. 

Jan. 

Jan. 

Feb. 

Feb. 

Mar. 

Mar. 

Apr. 

Apr. 

May 

May 

June 

June 

July 

July 


30 
14 
28 

14 
31 
15 
30 
14 
31 
15 
30 
14 
31 
14 
31 
14 
29 

IS 
31 
15 
30 
IS 
30 
14 
31 
IS 

28 

IS 

30 

IS 

30- 

17 
31 
15 

30 

IS 

31 


Premium  on 
gold  in  %. 

II 


,10^ 
.11.20 

.  954 

.  g'A 

.  m 

.  8 
.  s'A 
.  3H 
■  3 

.  354 
.  3^/4 
.  3^ 
.  3^ 
.  3M 

.    21/4 

.  5 
.  SA 
.  SVa 
.  53.4 

.  s'A 
.  2V2 
.  2 
'  4 

.  8 

.  5^ 

.  5 

.  IV2 
•  9 
.  9^ 
.14 

.I2->4 

.13 

.133/4 

.143^ 


18  A  project  presented  for  the  incretise  of  the  legal  tender  notes  was  presented 
by  15  Senators,  but  was  not  approved. 

"The  President  of  the  Uepnblic  turned  over  the  public  affairs  to  tlie  Minister 
of  the  Interior  on  account  of  severe  illness. 

(705) 


128 


The  Annals  of  the  American  Academy 


Year. 

I9OI 

19OI 

I90I 

I90I 

I90I 

I9OI 

I9OI 

I9OI 

19OI 

I9OI 

1902 

1902 

1902 

1902 

1902 

1902 

1902 

1902 

1902 

1902 

1902 

1902 

1902 

1902 

1902 

1902 

1902 

1902 

1902 

1902 

1902 

1902 

1902 

1903 

1903 


Month. 

August 

August 

Sept. 

Sept. 

Oct. 

Oct. 

Nov. 

Dec. 

Dec. 

Dec. 

Jan. 

Jan. 

Feb. 

Feb. 

Mar. 

Mar. 

Apr. 

Apr. 

May 

May 

June 

June 

July 

July 

August 

August 

Sept. 

Sept. 

Oct. 

Oct. 

Nov. 

Nov. 

Dec. 

Jan. 

Jan. 


14 
30 
13 
30 
15 
31 
14 
22 

14 

30" 

IS 

30 

14 

28 

IS 

31 
15 
30 
15 

30" 

14 
30 

IS 

31 
14 
29 

14 

30 
15 
30 
14 
29 

15 

10 

15 


Premium  on. 
gold  in  % 

loM 

81^ 

10 

13 

I2-}4 

15!^ 

15 

i7J^ 

23 

26 

24 

261^ 

27.80 

27^ 

3IM 

29 

291^ 

25 

2Z 

13-40 

14 

mVa 

11^/^ 

14 

12 

II 

\iy2 

11-30 

11.60 

11^/4 

"^ 

10 

7 

7V2 


Year. 

1903 
1903 
1903 
1903 
1903 
1903 
1903 
1903 
1903 
1903 
1903 
1903 
1903 
1903 
1903 
1903 

1903 
1903 
1903 
1903 
1903 
1903 
1904 
1904 
1904 
1904 
1904 
1904 
1904 
1904 
1904 
1904 
1904 
1904 
1904 


Month. 

Feb. 

Feb. 

Mar. 

Mar. 

Apr. 

Apr. 

May 

May 

June 

June 

July 

July 

August 

August 

Sept. 

Sept. 

Oct. 

Oct. 

Nov. 

Nov. 

Dec. 

Dec. 

Jar. 

Jan. 

Feb. 

Feb. 

Mar. 

Mar. 

Apr. 

Apr. 

May 

May 

June 

June 

July 


2 

16 

2 

14 
10 

IS 
I 

16 
I 

15 

2 
16 

I 
16 

2 
16 

I 

15 

2 
16 

I 
26 
15 
30 
18 
28 
14 
30 
16 
30 
14 
30 
16 
27 
14 


Premium  on 
gold  in  %. 

9% 

8.90 

7% 

83/4 

7 

8.20 

7.80 

8 

10 

7.80 

7^/2 

7% 

8 

9'/^ 

9.20 

8.80 


9M 
8.40 
8 

^V2 

7-30 

8 

8.20 

7/2 
7% 

7yA 
7V2 
7^ 

6 
6 

5-70 
6.80 


1^  The    stato    of    international    relations    with    the    Argentine    Republic    inspired 
new  distrust. 

1°  The  Argentine  conflict  was  arranged  finally. 


(706) 


THE  SOCIAL  EVOLUTION  OF  THE  ARGENTINE 
REPUBLIC 


By  The  Hon.  Ernesto  Quesada, 

Attorney-General  of  the  Argentine  Republic;   Professor  in  the  Universities 
of  Buenos  Ayres  and  La   Plata. 


To  condense  into  a  few  pages  several  centuries  of  the 
history  of  a  nation  Hke  the  Argentine  Republic,  to  give  some  idea  of 
the  nature  of  the  forces  that  have  determined  the  development  of 
this  country  from  the  end  of  the  sixteenth  century,  the  period  of  its 
discovery,  to  this  the  second  decade  of  the  twentieth,  when  it  is 
celebrating  the  first  centennial  of  its  independence,  is  a  task  at  once 
delicate  and  arduous.  For,  aside  from  these  natural  difficulties,  it 
will  be  necessary  to  avoid  all  details,  to  shun  statistics,  and  even 
to  lay  aside  historical  evidence,  in  order  to  crystallize  into  seemingly 
dogmatic  statements,  the  complicated  social  evolution  of  a  people 
in  process  of  transformation,  a  people  still  in  a  formative  period. 
It  is  a  venture  bordering  upon  the  impossible. 

A  century  after  the  commencement  of  the  conquest  of  the  Amer- 
ican continent  and  after  the  scattering  over  the  land  of  the  invading 
race,  at  once  warlike  and  religious,  an  expedition  which  was  purely 
Andalusian  discovered  the  River  Plate  in  the  southern  extremity  of 
the  continent.  Instead  of  penetrating  to  the  south,  the  expedition 
fixed  its  gaze  northward,  searching  for  a  route  by  which  to  renew 
relations  with  the  rich  district  of  the  old  empire  of  the  Incas.  This 
was  in  obedience  to  that  thirst  after  wealth  which  characterized 
the  taking  possession  of  America.  Two  centuries  later,  these  remote 
provinces  had  been  converted  into  the  very  important  viceroyship 
of  the  River  Plate.  In  one  direction  it  extended  from  the  tropical 
viceroyship  of  Peru  and  the  torrid  lands  of  Portuguese  Brazil,  to 
Cape  Horn,  lashed  by  the  raging  Antarctic  seas,  and  in  the  other 
direction  it  stretched  from  the  chain  of  the  Andes,  which  runs  like 
a  solid  wall  the  length  of  one  of  its  flanks,  to  the  Atlantic  Ocean, 

iThe  Acadomy  wishes  to  express  its  appreciation  to  Lnyton  D.  Register,  Esq., 
of  the  Law  Department  of  the  University  of  I'ennsylvania.  and  to  Mr.  Enrique 
(ill,  of  the  National  University  of  La  Plata,  of  the  Argentine  Republic,  for  the 
translation  of  this  article. 

(707) 


130  The  Annals  of  the  American  Academy 

which  bathes  its  extensive  coasts.  This  enormous  territory  thus 
embraced  every  sort  of  chmate,  and  was  inhabited  by  a  hetero- 
geneous collection  of  aboriginal  races.  Its  conquest  and  colonization 
had  been  effected  upon  two  convergent  lines,  that  by  water,  by  the 
River  Plate,  that  by  land,  from  the  north.  This  impressed  upon  the 
civilization  of  these  regions  different  characteristics  which  must 
be  defined  since,  even  after  a  century  of  political  independence,  their 
mark  is  still  stamped  upon  the  ideals,  aspirations  and  conduct  of  the 
inhabitants. 

The  "Leyes  de  Indias,"-  faithful  reflections  of  the  purposes  of 
Spanish  colonization  in  America,  show  how  extraordinary  was  the 
importance  of  the  native  races,  how  relatively  few  were  the  Spanish 
conquerors  and  how  closely  the  two  races  became  mingled,  through 
the  regime  of  the  encomiendas^  the  mitas'^  and  the  yana- 
conazgos.^  The  Spanish  colonies  were  founded  and  developed  in 
the  midst  of  a  mass  of  people,  who,  because  of  their  enormous  supe- 
riority in  point  of  numbers,  necessarily  reacted  in  turn  upon  the  small 
number  of  the  invaders,  either  by  interbreeding  with  the  latter,  or  by 
the  contact  of  daily  life,  or  by  their  superior  adaptability  to  their 
natural  environment.  The  conquerors  themselves  presented  differ- 
ent traits,  according  to  the  region  of  Spain  from  which  they  came, 
and  naturally  they  sought  to  group  and  to  settle  themselves  in  obe- 
dience to  the  ethnic  affinities  of  their  origin.  Biscayans,  Basques, 
Castillians,  Aragonese,  Andalusians,  etc.,  gave  typical  characteristics 
to  every  American  region  where  they  established  themselves.  They 
transplanted  their  social  prejudices,  their  spirit  of  communal  inde- 
pendence, their  concentrated  energy  and  their  buoyant  temperament. 
From  this  it  resulted  that  in  whatever  corner  of  America  a  particu- 
lar Spanish  strain  of  blood  was  found,  there  were  reflected  the 
traits  of  the  corresponding  district  of  Spain. 

As  the  native  races  varied  according  to  the  region,  from  those 

•Old  Spanish  legislation  for  the  Spanish-American  colonies. 

^Encomienda  is  the  Spanish  name  for  the  concession,  granted  by  the  crown 
during  the  Spanish  Colonial  period,  of  a  certain  number  of  native  Indians,  to  a 
Spanish  conqueror  for  purposes  of  service.  The  Encomendero  was  the  recipient 
of  such  a  concession  from  the  crown. 

*iHta.  Spanish  term  for  the  distribution  by  lot  of  the  native  Indians  for  pur- 
poses of  public  work. 

^Yanacona~(jo.  Spanish  term  for  that  peculiar  Ijind  of  land  tenantship  by  which 
the  tenant  has  no  title  to  the  land,  but  receives  a  proportion  of  the  product  of  his 
labors  upon  the  land. 

(708) 


The   Social    livolution    of   the   Argentine   Re[>nbHc         131 

of  a  peaceful  and  civilized  character  to  those  of  an  untamable  and 
warlike  nature,  and  even  to  ferocious  savages,  the  Spanish  settle- 
ments existed  without  any  common  plan.  They  made  a  republic  with 
the  tribes,  and  they  were  the  beginning  of  a  Creole  type  which  was 
quite  distinct  in  each  locality.  In  the  viceroyship  of  Buenos  Ayres 
the  ethnic  geography  of  the  aborigines  shows  a  kaleidoscopic  variety 
of  races.  In  the  north  and  in  the  regions  which  formerly  had  been 
subject  to  the  rule  of  the  Incas,  the  population — both  servient  and 
dominant  classes — was  peaceful,  attached  to  the  soil,  resigned  and 
passive. 

In  those  regions  lying  between  the  two  great  rivers  the  popula- 
tion was  of  a  gentle  and  peace-loving  nature  and,  therefore,  was 
easily  molded  by  missionary  civilization.  Along  the  slopes  of  the 
Andes  the  people  were  daring,  excitable  and  independent.  The 
south  or  Patagonian  extremity  was  overrun  by  brave  and  uncon- 
querable tribes,  closely  related  to  that  Araucanian  race  which  the 
Spanish  conquest  never  entirely  succeeded  in  subduing.  The  Spanish 
settlements  on  the  other  hand  presented  different  characteristics.  In 
the  north  they  came  from  Lima,  and  were  Biscayan  and  Castillian, 
aristocratic,  very  proud  of  their  ancestry,  holding  aloof,  enriched  by 
the  mines  of  Potosi  and  the  commerce  of  the  fleet  of  Portobello. 
Southward  were  Andalusians  and  Spanish  common  folk,  little  given 
to  titles  and  conventionalities.  They  were  condemned  to  pursue  the 
smuggler's  trade,  because  the  mother  country,  following  an  economic 
error  of  the  time  and  perhaps  owing  to  deficient  geographic  knowl- 
edge, permitted  them  only  an  overland  commerce,  by  mule  back,  from 
the  Panama  fleet  which  unloaded  its  cargoes  in  Callao.  Plence  in 
the  provinces  of  the  north,  called  High  Peru,  and  in  the  present 
provinces  of  Jujuy  and  Tucuman,  the  Spanish  population  held  up 
Lima  as  their  ideal,  and  exhibited  both  its  vices  and  its  virtues.  Out 
of  it  was  formed  the  aristocratic,  commercial  and  luxurious  city  of 
Salta.  On  the  other  hand,  in  the  river  provinces,  the  existence  of 
the  cities  w'as  precarious  and  fraught  with  the  dangers  of  a  smug- 
gling trade  carried  on  with  the  Portugese  neighbors — the  source  of 
the  centuries-old  controversy  of  Sacramento  colony.  These  settle- 
ments were  not  unacquainted  with  the  fear  of  pirates,  of  daring 
navigators  and  of  roving  slave  dealers,  who  on  their  arrival  at  the 
River  Plate  unloaded  the  "products  of  their  country."  with  the 
toleration  and  secret  complicity  of  the  government  officials  and  with 

(709) 


132  The  .huials  of  the  American  Academy 

the  connivance  of  the  inhabitants.  These  inhabitants  were  true 
outlaws.  They  scoffed  at  the  administration  and  fiscal  measures  and 
trusted  more  to  their  fists  than  they  feared  being  caught  in  the 
complicated  meshes  of  the  uneconomic  laws. 

The  interbreeding  of  these  different  classes  of  population  re- 
sulted in  Creole  types,  characteristic  of  each  region.  In  the  central  cities 
of  the  north,  they  were  always  aristocratic  and  devoted  to  learning, 
while  in  the  vast  stretches  of  country  they  lived  the  semi-feudal 
life  of  cncomenderos.  The  interbreeding  with  the  Indians  formed 
an  inferior  class  of  half  breed  which  approached  the  type  of  the 
mother  more  than  that  of  the  father  and  which  was  certainly  not  a 
robust  or  handsome  race.  In  the  river  region,  the  population  lived 
on  a  democratic  plane  of  equality  in  the  cities,  while  in  the  rural 
districts  they  became  that  creole  type  known  as  the  ganchoS'  Found 
amidst  a  scattered  population  and  inheriting  the  far  from  sedentary 
habits  of  the  Spanish  mother  race,  the  gancho  preferred  the  free 
and  roving  existence  of  the  pampas.  He  lived  by  the  herds  of  semi- 
wild  animals,  which  had  multiplied  amazingly  since  Mendoza's 
expedition  had  introduced  the  very  limited  stock,  destined  later  to 
be  converted  into  the  stupendous  riches  of  this  country.  In  the 
central,  more  mountainous  region  also,  the  interbreeding  of  the 
races  produced  very  definite  results  and  the  creole  population  of  the 
rural  districts  acquired  traits  as  though  living  closely  associated  with 
the  ganchos  of  the  pampas.  In  the  south  the  aboriginal  races  re- 
mained pure,  except  for  the  insignificant  mixing  which  came  from 
the  Spanish  captive  women,  victims  of  the  attacks  of  the  Tehuelches 
of  the  north,  from  Santiago  del  Estero  to  the  Bolivian  frontier, 
populations.  Wherever  the  native  population  was  dense  and  attached 
to  the  soil  the  Creoles  living  in  the  country  and  about  the  cities  show 
a  closer  affinity  with  it,  than  with  the  Spanish  blood.  They  adopt 
native  habits  and  conform  to  native  peculiarities,  even  to  the  extent 
of  adopting  the  melancholy  rhythm  of  the  music  and  songs,  those 
unique  tristes  which  are  heard  even  to-day  in  the  Argentine  provinces 
of  the  north,  from  Santiago  del  Estero  to  the  Bolivian  trontrer. 
There  the  creole  laborers  of  the  land  and  the  half  breeds  of  the  dis- 
tricts about  the  cities  tenderly  preserve  the  qiikhua,  or  native  lan- 
guage of  their  ancestors,  by  intermixing  it  with  the  Spanish.  The 
same  close  affinity  with  the  native  element  is  found  in  the  river 

"The  cowboy  of  the  Argentine  Pampas. 

(710) 


The   Social   Lzviiitioii    of   the   Argentine   Republic         133 

provinces,  and  especially  in  Corrientes,  where  in  the  rural  and 
semi-rural  districts  the  dregs  of  the  missionary  population  have  pre- 
served as  their  most  precious  possession  the  gnarani  dialect.  But, 
where  the  native  population  was  more  scattered  and  nomadic,  the 
Creole  population  became  transformed  and  converted  into  the  gaucho 
or  cowboy  of  the  pampas,  a  very  handsome  half  breed,  full  of  energ}% 
of  noble  instincts,  accustomed  to  the  freest  sort  of  life  over  boundless 
plains,  where  each  one  depended  solely  upon  himself  and  recognized 
no  superior.  Here  we  have  the  explanation  of  the  great  hold  which 
this  type  {gaucho)  has  upon  the  imagination. 

In  spite  of  these  differences,  however,  the  colonial  life  was 
stamped  with  a  certain  uniformity  which  served  as  a  background 
for  these  local  peculiarities.  Spanish-American  society  was  zealously 
preserved  from  contact  with  other  European  nations.  Only  inhab- 
itants of  Spain  were  free  to  go  and  come,  so  that  this  triple  char- 
acteristic— that  they  were  Spanish,  monarchical  and  orthodox  Cath- 
olic— was  the  salient  feature  common  to  all  South  America.  The 
person  of  the  monarch  and  the  supreme  authority  of  the  colonial 
office  were  very  distant  and  the  tribunals  of  the  viceroys  and  gov- 
ernors holding  actual  sessions  there  upon  the  territory,  were  the  real 
and  tangible  personifications  of  the  monarchy.  The  Pope  himself 
was  also  very  distant  and  had  given  over  the  superintendence  of 
ecclesiastical  affairs  to  the  crown,  which  had  in  turn  confided  it  to 
the  respective  viceroys.  The  bishops  and  religious  orders  were, 
strictly  speaking,  the  visible  representatives  of  religion.  In  this  way 
throne  and  altar  came  in  touch  with  the  colonial  populations,  who 
took  heated  sides  in  the  formidable  conflicts  which  used  to  arise 
between  the  representatives  of  each.  But  they  retained  respect  for 
them ;  they  recognized  their  high  merits  and  prerogatives  and  obeyed 
them  as  representing  that  which  could  neither  be  questioned  nor 
altered.  Public  officials  of  all  grades  were  drafted  from  Spain  and 
remained  for  definite  periods.  The  laws  forbade  them  to  mix  with 
the  populations  and  they  kept  themselves  aloof,  with  the  ostensible 
purpose  of  assuring  their  complete  impartiality.  But  the  result  was 
that  they  tried  to  take  advantage  of  their  period  in  office  to  swell  their 
personal  fortunes,  without  allowing  themselves  to  be  deterred  by 
any  scruples  or  drawing  rein  to  their  appetites.  The  priests  even, 
both  secular  and  those  regularly  ordained,  allowed  themselves  to 

(711) 


134  j^/i^  Annals  of  the  American  Academy 

be  carried  away  by  that  spirit  of  self-seeking  which  led  them  to 
look  upon  America  as  a  mine  to  be  exploited. 

Doubtless  there  were  zealous  officials  both  civil  and  religious 
who  performed  the  best  type  of  service.  The  Spaniards  were  estab- 
lished amidst  a  native  population,  who  devoted  themselves  to  com- 
merce or  to  mining  in  the  north,  and  to  the  raising  of  cattle  and 
lesser  trades  in  the  river  and  central  districts,  and  they  always  looked 
upon  their  residence  in  this  part  of  American  territory  as  a  tempo- 
rary sojourn,  during  which  to  acquire  riches.  The  Creoles,  of  every 
class,  both  of  the  city  and  of  the  country,  perhaps  because  they 
seemed  to  be  looked  down  upon  by  the  Spaniards,  were  uncon- 
sciously trying  to  enlarge  their  hold  upon  affairs  of  all  kinds.  They 
felt  themselves,  as  it  were,  rooted  to  the  soil,  and  far  from  proceed- 
ing only  from  selfish  motives  of  money  making,  they  took  an  interest 
in  local  affairs,  which,  for  them,  were  of  greater  importance  than 
those  of  a  crown,  only  vaguely  known  to  them  by  report.  The  city 
Creoles,  thanks  to  an  advanced  communal  spirit,  aroused  by  the  estab- 
lishment of  the  cabildos  or  Spanish  town  council,  were  diligently 
at  work  on  their  own  municipal  problems.  They  thus  became  accus- 
tomed to  limit  their  horizon  to  the  limits  of  their  own  city  and  of 
the  immediately  surrounding  country  district,  because  communication 
between  the  cities  was  slow,  difficult  and  dangerous,  a  condition 
which  resulted  in  their  virtual  isolation  from  each  other.  The  city 
might  almost  be  regarded  as  the  center  of  their  universe.  From 
the  rest  of  the  world  news  arrived  months  and  years  later,  tempered 
or  misrepresented.  It  awakened  not  the  faintest  echo.  It  might  as 
well  have  been  the  news  of  far  away  ages  and  peoples. 

The  mass  of  the  natives,  with  whose  women  the  military  and 
civil  population  cohabited,  since  relatively  few  Spanish  women  came 
to  America,  took  no  interest  whatsoever  in  the  affairs  of  a  monarchy 
which  was  not  that  of  their  ancestors  but  of  a  race  different  from 
themselves.  They  showed,  rather,  such  a  passive  indifference  that 
each  community  seemed  a  world  unto  itself,  occupied  and  pre-occu- 
pied  only  with  its  own  matters.  The  religious  and  civil  officials,  in 
their  turn,  were  soon  contaminated  by  this  environment.  They 
gave  to  local  affairs  so  excessive  an  importance  that  it  also  appeared 
to  their  eyes  as  if  the  boundary  of  the  Indian  city  was  the  iiltima 
Thnle  of  civilization.  In  the  northern  provinces,  which  had  reached 
the  final  stage  of  perfection  under  the  old  Inca  conquest,  the  native 

(712) 


The  Social  Evolution  of  the  Argentine  Republic  135 

population  preserved  and  protected  its  pre-Columbian  traditions  by 
the  use  of  their  dialect,  the  quichua  tongue.  The  regime  of  the 
cncomienda,  the  mitas  and  the  yanaconasgo  had  produced  only  a  for- 
mal subjection  of  the  natives.  In  the  depths  of  their  souls  the  natives 
preserved  and  fostered  traditions  of  bygone  centuries.  In  this  way 
the  Creoles,  the  product  of  interbreeding,  were  recast  into  the  dense 
mass  of  the  Indian  population  and  became  more  conversant 
with  American  traditions  than  Spanish. 

Amongst  the  missionary  converts,  the  Jesuits  had  erected  cities 
that  flourished  artificially  under  their  care.  They  were  inhabited 
only  by  Indian  races,  and  the  Jesuits  zealously  guarded  them 
from  contact  with  the  Spaniards  whom  they  removed  far  from 
their  admirable  theocratic  empire  as  though  they  were  the 
very  incarnation  of  evil.  An  unreal  civilization  was  thus 
created,  governed  patriarchally  by  the  priests  and  without  any 
vitality  of  its  own.  Hence,  the  expulsion  of  the  priests  by  the 
coup  d'  etat  of  Charles  III  brought  about  the  destruction  of  these 
populations,  which  had  realized  during  the  century  of  their  existence, 
the  ideal  of  the  most  exacting  of  Utopian  civilization.  But  the  results 
were  not  such  as  had  been  desired.  These  Indians,  on  being  dis- 
tributed over  the  colonies,  did  not  coalesce  with  the  rest  of  the  inhab- 
itants, but  returned  to  the  depths  of  barbarism  or,  as  in  the  present 
province  of  Corrientes,  constituted  the  mass  of  the  population,  an 
element  indifferent  to  national  interests  just  as  the  old  missionaries 
had  been  to  those  of  the  crown  and  sensible  only  to  the  recollection 
of  their  ancient  and  traditional  life,  that  is  to  say,  to  their  own 
local  affairs. 

In  the  central  and  river  provinces,  the  marvelous  increase  of 
animals  capable  of  domestication  but  still  in  a  wild  state  brought 
■  about  a  profound  transformation.  The  native  tribes,  sparser  than 
in  the  north,  without  losing  any  of  their  savage  customs,  soon  pos- 
sessed themselves  of  the  horse  and  overran  the  boundless  pampas. 
The  Creoles  of  the  country  districts  and  the  gauchos  in  their  turn 
vied  for  the  possession  of  the  horse.  No  longer  able  to  remold  their 
life  to  that  of  the  savage  tribes,  they  checked  their  bold  and  fero- 
cious habits  and  became  keen  and  cautious,  forming  a  race  of  special 
type,  midway  between  the  Indian  and  the  Spaniard.  They  were 
extreme  individualists,  for  in  the  immense  pampas,  authority,  both 
civil   and   religious  could   obtain   but   a  weak  hold.     The  gaucho 

(713) 


1^6  The  Annals  of  the  American  Academy 

made  so  complete  a  face-about  from  his  former  self  as  to  devote  his 
life  solely  to  cattle  raising.  He  evolved  a  special  fitness  or  adapta- 
bility to  his  new  life  and  created  the  most  curious  types,  from  the 
zumhon  compadrito  with  his  peculiar  cloak  and  chiripa,  who 
flashed  his  sarcastic  jests  with  such  grace  and  elegance,  to  the  poet 
troubador  and  famous  animal  tracker  who  was  but  little  less  keen 
than  the  hound  in  scenting  and  following  the  trail  of  man  or  beast. 
As  the  gauchos  came  in  contact  with  not  a  few  of  the  city  popu- 
lation, upon  whom  they  were  dependent  for  obtaining  the  things  they 
needed  in  exchange  for  pelts  and  the  products  of  the  country,  they 
formed  with  such  of  the  latter  as  came  most  closely  in  touch  with 
them,  a  community  of  ideas  and  aims.  Thus  by  busying  themselves 
only  with  their  own  special  lives,  they  became  independent  and 
without  attachment  for  any  but  their  respective  municipal  centers. 
Each  region  possessed  its  local  feature,  each  was  separated  from  the 
rest  and  all  were  but  nominally  linked  and  united  with  their  remote 
and  common  monarch. 

In  the  River  Plate  region,  leaving  aside  the  factor  of  geo- 
graphic interest,  to  which  I  have  just  made  allusion,  the  racial 
history  was  limited  to  the  Spanish  population  and  its  Creole  inter- 
breeding with  the  native  races,  because  the  negro  population  had 
no  importance  whatsoever,  in  this  part  of  America.  The  quantity 
of  negro  slaves  introduced  by  the  "dealers"  was  reduced  to  a  mini- 
mum, and  even  these,  upon  the  breaking  out  of  the  war  of  indepen- 
dence, were  killed  off,  for  now  that  their  masters  were  freeing  them, 
they  formed  the  great  body  of  the  troops.  In  this  way  they  helped 
the  American  cause.  The  mulattoes,  consequently,  were  also  reduced 
in  number.  This  process  was  carried  to  such  a  point  that  the  singular 
scarcity  of  pure  negroes  or  even  of  mulattoes  was  a  real  character- 
istic of  this  country. 

Foreign  influence  could  only  penetrate  by  way  of  the  Atlantic, 
and  even  then  only  covertly,  unless  it  were  by  crossing  the 
rocky  barrier  of  the  Andes.  The  Portuguese  influence  was  limited 
to  the  profitable  commercial  relations  with  the  smugglers.  That 
of  other  nations  only  made  itself  felt  through  the  occasional  visits 
of  ships  forced  to  take  shelter  in  the  La  Plata  from  time  to  time, 
or  dropping  anchor  upon  various  pretexts,  but  always  with  the 
intention  of  smuggling.  This  was  an  open  secret  to  the  then  few 
inhabitants  of  Buenos  Ay  res,  the  possibilities  of  which  as  a  port, 

(714) 


The  Social  Evolutiun  of  the  ^iryentine  Republic  137 

although  gainsayed  by  the  crown,  had  been  ordained  by  nature. 
When,  during  the  last  days  of  colonial  domination,  commerce  was 
permitted  to  the  port  of  Buenos  Ayres,  there  was  no  longer  time  for 
foreign  influence  to  penetrate  to  the  heart  of  the  country.  The 
English  invasions  left  a  greater  residue  of  influence  through  the 
distribution  of  the  English  prisoners,  who  in  great  part  established 
homes  in  the  midland  regions  to  which  they  were  sent.  There,  in 
the  midst  of  the  Spanish  families,  with  whom  they  were  left,  they 
disseminated  ideas  of  liberty  and  standards  of  independence,  un- 
known among  the  rest  of  the  population,  the  best  classes  of  which 
in  those  days  of  unrest,  were  a  turbulent  and  irrepressible  element. 
The  revolution  of  May,  1810,  wrought  a  fundamental  change 
in  the  social  situation.  Distinguished  officers  of  the  Napoleonic  wars 
came  to  the  country  to  offer  their  military  services.  English  mer- 
chants, attracted  by  the  reports  of  the  English  invasions  of  the 
Argentine  Republic  in  1806  and  1807,  hurried  over  in  increasing 
numbers.  Soon  they  were  influencing  the  society  of  Buenos  Ayres 
which  adopted  London  fashions,  many  of  its  customs,  and  became 
accustomed  to  the  English  character.  Foreign  commerce  was  con- 
centrated in  the  hands  of  the  English  and  many  of  these  merchants 
finally  married  in  the  country.  During  the  colonial  epoch  only 
books  expurgated  by  the  Inquisition  had  been  admitted,  but  now 
the  revolutionary  movement  unmuzzled  these  mysteries  and  flung 
wide  the  doors  through  which  penetrated  a  flood  of  French  and 
English  works.  The  doctrines  of  the  French  revolution  were  at 
that  time  the  passion  of  the  majority  of  our  public  men,  and  its 
influence,  even  its  Jacobin  and  terrorist  phases,  is  traceable  from 
the  first  instant.  This  is  revealed  in  the  "plan  of  government"  of 
Moreno.  On  the  other  hand,  the  constitutional  doctrines  of  the 
Anglo-Saxons  were  embraced  only  by  the  few.  Dorrego  went  to  the 
United  States  and  there  absorbed  them.  During  the  first  decade 
after  the  revolution,  the  educational  system  scarcely  advanced  at  all 
but  followed  closely  to  the  traditional  path  of  teaching  taught  by 
the  University  of  Codoba.  The  University  of  Buenos  Ayres  was 
founded  in  the  second  decade,  and  made  an  efifort  to  reform  public 
education.  But  the  war  of  independence  was  not  yet  over  and  the 
internal  situation  of  the  country  at  the  end  of  the  anarchical  disso- 
lution which  took  place  in  1820,  was  such  that  a  multitude  of  afifairs 

(715) 


138  The  Annals  of  tJie  American  Academy 

demanded  attention,  and  as  yet  it  was  hardly  possible,  outside  of 
the  large  cities,  to  turn  to  such  questions  of  reform. 

The  winning  of  independence  was  the  cause  of  the  sad  dismem- 
berment of  the  viceroyship  of  the  River  Plate  and  the  statesmen 
of  the  period  could  not  have  prevented  it.  From  what  was  once  a 
single  historic  province  there  have  gradually  been  detached  the 
province  of  High  Peru,  to-day  the  Republic  of  Bolivia ;  the  province 
of  Paraguay,  to-day  the  Republic  of  the  same  name;  the  eastern 
missions  which  now  constitute  the  present  Brazilian  provinces  of 
Rio  Grande  do  Sul,  Santa  Catalina  and  Sao  Paulo.  The  Banda 
Oriental  has  since  become  the  Republic  of  Uruguay ;  the  Falkland 
Islands  were  snatched  by  England;  the  territory  about  the  Straits 
of  Magellan  was  ceded  later  to  Chile,  under  color  of  regulating  the 
boundary  line.  The  Argentine  Republic,  during  the  first  century 
of  its  existence  as  an  independent  nation,  far  from  acquiring  a 
single  square  mile  of  territory,  has  continued  to  lose  territory  at 
every  point  of  the  compass.  Her  international  policy,  from  that 
point  of  view,  has  been  lamentable  and  the  memory  of  it  is  still  a 
bitter  lesson. 

Within  the  enormous  territorial  expanse  which  now  constitutes 
the  Argentine  Republic  political  integration  was  effected  slowly. 
The  different  populations  settled  at  intervals  along  the  routes  which 
connected  Buenos  Ayres  with  Lima  on  the  one  side,  with  the  Andes 
on  another  and  with  Asuncion  on  still  another.  Each  settlement 
was  an  oasis  of  Spanish  population  set  in  the  midst  of  a  savage  coun- 
try. In  order  to  establish  something  approaching  unity  within  each 
section,  the  people  organized  themselves  ofter  the  pattern  of  the 
urban  centers  of  Spain  with  their  Cabildo  or  town  council  as  the 
communal  authority,  which  controlled  and  regulated  the  extremes 
of  opinion  and  conditions  and  brought  the  whole  municipal  life  to 
a  focus.  Each  settlement  lived  a  life  apart,  separated  from  the 
others.  In  fact  they  w^ere  cast  in  the  mold  of  the  ancient  Spanish 
village  society,  and  the  central  authority  only  made  itself  felt  at 
infrequent  intervals. 

The  inhabitants  of  each  village  thus  developed  an  aptitude 
for  municipal  life  and  for  self-government,  and  a  concentration 
upon  local  interests  which  became  the  basis  of  their  political 
development.  They  fostered  a  local  character  which  was  the 
very  foundation  and  essence  of  their  later  federal  tendency.       To 

(716) 


Tlic  Social  Evolution  of  the  Argentine  Republic  139 

the  interests  and  pretensions  of  the  crown  as  formulated  by  the 
"Council  of  the  Indies,"  they  preferred  the  authority  of  the  vice- 
roy and  of  the  intendants,  but  their  main  preference  was  the  munici- 
pality itself,  whose  frank  and  loyal  mouthpiece  was  the  traditional 
Cabildo.  For  this  reason,  when  the  movement  for  independence 
commenced,  each  village  and  each  city  was  led  by  its  own  Cabildo, 
and  it  was  the  Cabildo  which  gave  vigor  and  form  to  the  revolution. 
Around  the  Cabildo  the  inhabitants  of  the  vicinity  grouped  them- 
selves in  the  dififerent  organic  or  anarchic  revolts  which  followed. 
It  was  for  this  reason,  too,  since  the  present  republic  possessed 
no  basis  of  political  division,  that  each  one  of  the  cities  formed  a 
nucleus  in  its  respective  province  of  the  same  name,  and  that  the 
whole  territory  was  subdivided  according  to  the  radius  of  authority 
exercised  by  the  principal  cities  of  colonial  times,  without  any 
account  being  taken  of  economic  autonomy  or  of  demography. 

Federal  sentiment  made  its  appearance  profoundly  rooted  in  tra- 
dition and  blood,  and  the  tendency  towards  centralization  only  eman- 
ated from  certain  groups  of  dreamers  at  the  metropolis  who  with 
their  eyes  closed  to  the  past  believed  along  with  such  deluded  men 
as  Rivadavia  that,  by  destroying  the  traditional  Cabildo,  they  would 
wipe  the  state  clean  of  such  precedents,  just  as  the  Jacobins  of  the 
French  Revolution  did  with  the  institutions  of  the  ancient  regime. 
Argentine  society  issued  from  the  seventeenth  and  eighteenth  cen- 
turies already  shaped  toward  local  self-government  and  local 
loyalty.  It  already  appeared  a  federation  in  fact  which  was  easily 
transformed  into  a  federation  in  law,  because  the  federal  idea  was 
at  bottom  the  very  heart  and  soul  of  things. 

The  development  of  our  colonization  also  indicated  that  of 
our  civilization.  As  we  approach  the  north,  the  brilliant  center  of 
civilization  of  Lima  society  becomes  more  aristocratic,  infatuated 
with  its  learning,  luxurious  and  fastidious.  The  youth  of  the  Plate 
A'^alley  were  attracted  to  the  University  of  Chuquisaca,  where, 
amidst  its  cloisters,  they  acquired  a  grave  and  disputacious  manner. 
Later  the  University  of  Cordoba,  like  a  pale  reflection  of  the  former, 
drew  upon  a  part  of  these  youths  and,  if  they  left  its  lecture  halls 
also  practiced  in  the  art  of  sophistry,  they  did  not  imbibe  in  return 
that  atmosphere  of  aristocratic  aloofness,  pomp  and  presumption. 
Buenos  Ayres  and  the  river  country  were  without  a  university  and 
without  an  aristocracy.    At  the  periodic  auctions  of  titles  of  nobility, 

(717) 


140  The  Annals  of  the  American  Academy 

the  receipts  of  which  were  added  to  the  colonial  contributions  and 
were  intended  to  meet  a  certain  deficit  in  the  Spanish  treasury,  not  a 
purchaser  appeared  and  there  was  not  a  single  herder  of  the 
pampas  nor  a  single  rich  smuggler  who  would  bid.  The  titles 
which  were  thus  put  up  to  sale  remained  unpurchased,  for  the  peo- 
ple held  them  in  no  esteem. 

With  no  resources  other  than  its  commerce  and  industry  which 
were  both  of  a  contraband  nature,  Buenos  Ayres  developed  more 
rapidly  than  other  cities  and  wath  a  greater  freedom  from  "red  tape" 
and  formalism,  in  spite  of  its  being  the  seat  of  the  general  govern- 
ment, with  its  Spanish  officials,  its  civil,  military  and  religious 
authorities  and  an  administrative  machinery  identical  with  that  of  the 
other  capitals  of  the  viceroyship.  For  here  there  was  not  the  same 
atmosphere,  the  life  was  simple  and  democratic,  the  officials  had  no 
stage  from  which  to  display  their  importance,  and  within  the  narrow 
walls  of  the  modest  home  of  the  government,  the  few  inhabitants  of 
this  metropolis  used  to  mingle  in  its  marshy,  unpaved  streets,  or  in 
their  unpretentious  and  simple  adobe  houses.  They  treated  each 
other  with  a  certain  equality,  which  was  due  precisely  to  those  con- 
ditions of  intense  individualism  developed  of  necessity  in  a  cattle 
raising  community. 

In  the  northern  and  central  districts  society  was  cast  in  the 
Peruvian  mold,  a  reproduction  of  Spanish  civilization,  aristocrats 
adopting  primogeniture  and,  in  modified  form,  the  feudal  regime  of 
the  cncomenderos.  In  the  river  and  mountain  region,  the  urban  was 
a  reflection  of  the  rural  population,  independent,  haughty,  brave, 
accustomed  to  making  forays  upon  horseback  over  the  endless 
pampas,  trusting  to  its  own  decision  and  in  the  end  to  the  knife, 
which  was  a  symbol  of  the  worship  of  personal  courage,  inherited 
from  Spanish  ancestors  who  had  developed  it  during  the  centuries 
of  the  struggle  against  the  Aloors.  In  the  river  district  the  com- 
merce, which  in  the  main  was  carried  on  illegally  by  doggedly  per- 
severing merchants  who  plied  their  trade  fearlessly  wnth  pirates  and 
foreign  smugglers,  caused  a  certain  spirit  of  self-confidence  to  grow. 
This  spirit  made  itself  felt  in  the  popular  movement  of  the  reconquest 
of  1806,  and  in  the  impulse  of  the  revolution  of  May,  1810. 

From  Buenos  Ayres  started  the  movement  for  independence, 
and  the  Cabildos  of  the  interior  cities  fell  in  with  the  move- 
ment with  more  or  less  alacrity.     Hence  the  further  inland  these 

(718) 


The   Social   Evolutio)i    of   the   Argentine   Republic         141 

cities  were,  the  less  enthusiastic.  The  Paraguayan  region  iso- 
hited  itself  and  followed  the  conservative  policy  of  the  Cabildo  of 
Asuncion.  The  province  of  High  Peru,  in  spite  of  its  efforts,  was 
the  last  to  revolt  and  never  followed  with  any  ardor  the  movement 
initiated  by  the  metropolis.  Indeed,  the  revolution  of  May,  which 
had  spread  to  the  banks  of  the  Paraguay  river  and  over  the  plateau 
of  Bolivia,  might  not,  perhaps,  have  succeeded  in  so  closely  cement- 
ing, in  spite  of  the  righteousness  of  its  cause,  the  independence  pro- 
claimed in  Tucuman  in  1816,  had  not  the  inspiration  of  San  Martin 
added  that  powerful  impulse  which  flung  armies  across  the  Andes, 
liberated  Chile  from  Spanish  dominion  and  brought  independence  to 
Peru.  He  might  have  pursued  this  glorious  course  toward  the  inde- 
pendence of  the  whole  continent,  if  the  colossal  egotism  of  Bolivar 
in  that  tragic  conference  of  Guayaquil  had  not  placed  our  national 
hero  in  the  dilemma  of  either  eliminating  himself  and  leaving  his 
selfish  rival  to  wear  the  laurels  planted  and  nurtured  by  Argentine 
blood  or  of  sacrificing  the  fruits  of  the  campaign  for  independence, 
by  not  being  able  to  obtain  from  him  the  military  assistance  he  was 
in  need  of.  He  placed  his  country  before  his  own  glory  and  yielded 
the  field  to  one  to  whom  personal  renown  was  preferable  to  all  else. 
For  the  social  evolution  of  Argentine  the  sacrifice  of  San  IMartin 
was  of  incalculable  importance.  Upon  eliminating  himself,  he  left 
to  his  rival  the  army  which  he  had  himself  led  until  then  and  this 
country  was  deprived  of  its  one  organizing  force.  Disintegrating 
tendencies  manifested  themselves  without  counter-check.  In  the 
second  decade  of  the  century,  various  little  republics  were  defiantly 
established  in  the  interior.  They  were  constructed  upon  the  plan  of 
the  old  settlements  which  had  risen  to  something  greater.  They  were 
governed  by  Cabildos,  and  these  in  turn  obeyed  the  local  leader,  who 
was  raised  to  dictatorship  over  the  districts.  Each  province  was 
sufficient  unto  itself.  It  barely  communicated  with  the  others  and 
retrograded  towards  barbarism  without  regularly  organized  govern- 
ment or  other  will  than  that  of  its  respective  tyrant  and  the  free- 
lances who  were  his  immediate  followers.  Schools  closed;  families 
took  refuge  within  the  walls  of  their  dwellings;  terror  pervaded; 
life  was  everywhere  insecure;  those  who  could,  emigrated,  leaving 
behind  them  on  the  land  the  sick,  the  women  and  the  children.  Men 
were  bedfellows  in  misery;  there  was  no  industry,  no  commerce; 
sin  flourished  and  virtue  was  trampled  under  foot.     These  thirty 

(719) 


142  The  Annals  of  the  American  Academy 

years  of  bloody  and  merciless  civil  strife  made  prominent  the  idea  of 
the  rule  of  force.  People  were  taken  from  peaceful  work,  efficient 
teaching  languished,  every  social  bond  was  weakened  and  in  the  end 
a  society  evolved  in  which  not  education,  ancestry  or  fortune  exer- 
cised the  least  influence,  but  audacity,  the  impulse  of  the  local  leader, 
the  mob  instincts  of  the  city  population  and  of  the  rural  gaucho. 
The  local  leaders  and  their  followers  alone  wielded  any  real  power. 
They  dominated  without  possibility  of  counter-check  and  an  entire 
generation  tolerated  this  condition  during  that  terrible  period. 

The  local  leadership,  like  the  legendary  tyranny  of  ancient  Rome, 
demolished  everything  which  tried  to  rise  above  the  obedient,  pas- 
sive, resigned  and  common  level.  It  brutally  choked  it  or  forced  it 
to  emigrate,  and  Argentine  society  had  to  develop  in  these  anaemic 
surroundings.  There  was  no  possibility  of  foreign  immigration,  or 
of  establishing  industry  and  commerce. 

The  idea  of  nationality  was  observed  by  party  passion  and  the 
factions  were  ready  to  launch  out  upon  some  fight  upon  the  slightest 
pretext.  Social  classes  were  divided  into  irreconcilable  parties,  the 
reds  or  federalists,  and  the  blues  or  centralists,  those  who  believed  in 
the  local  leader,  and  those  who  detested  him.  The  former  were 
called  federalists,  because  they  believed  that  each  locality  ought  to 
adopt  the  kind  of  government  which  best  suited  it ;  the  latter  were 
called  the  centralists,  because  in  their  weakness  they  leaned  upon  the 
influence  of  the  national  government  in  order  to  give  to  the  whole 
country  a  common  unified  administration  of  which  the  local  govern- 
ment would  be  the  agent. 

Rosas  met  this  situation  and  put  an  end  to  it.  After  the  dis- 
memberment of  the  ephemeral  republic  of  1825,  and  the  national 
convention,  and  following  upon  the  Brazilian  war,  the  centralist 
party,  deceived  in  its  principles  and  in  its  men,  closed  its  doors  to 
counsel  and  committed  the  error  of  executing  Dorrego  at  Navarro. 
The  mass  of  the  rural  population  resisted  the  straight  jacket  pro- 
posed by  the  doctrinaires  of  the  centralist  party  and  in  this  they 
showed  themselves  unrelenting.  Then  Rosas  came  into  power  in 
the  government  of  Buenos  Ayres  and  also  secured  control  of  the 
situation  in  the  provinces.  He  succeeded  in  bringing  about  the 
organization  of  each  province  with  a  view  to  forming  the  Argentine 
Confederation.  He  was  entrusted  by  the  federation  with  the  man- 
agement of   foreign  relations.     He  left  the  interior  provinces  to 

(720) 


The   Social   Evolution   of   the   Argentine   Republic         143 

organize  themselves  after  the  pattern  of  the  government  of  Buenos 
Ayres.  Doubtless,  during  the  long  quarter  of  a  century  while  he  was 
dictator,  real  security  and  peace  were  never  enjoyed,  for  the  central- 
ist party  was  ambitious,  arrogant  and  factious,  plotting  within  it- 
self, and  when  it  was  not  exciting  to  rebellion,  or  leading  an  invasion 
it  was  provoking  foreign  intervention.  Finally  the  terrible  and  mer- 
ciless war  between  the  centralists  and  the  federalists  developed  a 
state  of  terror  which  culminated  in  the  excesses  of  the  year  1840. 
The  dictator  treated  his  adversaries  without  mercy  and  they  in  their 
turn  had  none  for  him.  To  be  strictly  truthful,  neither  party  can 
be  absolved  from  wicked  and  culpable  action.  Nor  can  I  shut  my 
eyes  to  the  fact  that  the  great  power  bred  pride,  and  that  pride  bred 
hatred  of  the  subject  class.  But  this  prolonged  dictatorship  saved 
the  country  from  the  anarchy  of  the  petty  republics  of  1820,  it 
solidified  the  country  into  a  sovereign  entity  and  it  gave  to  the  dif- 
ferent parts  the  cohesion  of  a  nation  capable  of  victoriously  resist- 
ing the  French  and  Anglo-French  interventions.  This  much  is  owed 
definitely  to  the  centralist  party,  who  in  this  way  solved  the  difficulty 
traditional  to  our  national  organization  and  so  guided  along  the  right 
road  the  severest  crisis  of  Argentine  history,  not  only  from  a  politi- 
cal but  also  from  a  sociological  point  of  view.  The  chasm  that  sepa- 
rated the  social  classes  of  the  capital  city  from  those  of  the  provincial 
districts  was  bridged;  the  prejudices  of  blood,  of  caste  and  fortune 
were  destroyed  and  there  was  established  complete  equality,  where 
every  man  was  the  heir  of  his  own  labor  and  depended  only  upon 
his  own  hands. 

After  the  battle  of  Caseros,  in  1852,  the  government  which 
had  so  used  and  abused  oppression  and  patronage  fell,  leaving 
the  country,  however,  in  such  a  condition  of  stability  and  internal 
organization  that  the  different  provinces  grouped  themselves  logically 
under  the  Convention  of  San  Nicolas.  The  Argentine  Federation 
was  maintained  and  Urquiza  was  placed  at  the  head  of  the  govern- 
ment. Despite  the  local  character  of  the  revolution  of  Buenos  Ayres, 
on  the  eleventh  of  September  the  country  at  large  adopted  the  funda- 
mental constitution  of  1853,  at  the  Congress  of  Santa  Fe.  The  gov- 
ernment of  the  recalcitrant  province  of  Parana  realized  but  slowly 
the  new  organization,  with  which  it  finally  incorporated  itself,  while 
the  nation  continued  developing  in  the  path  established  by  its  con- 
stitution. Without  losing  sight,  therefore,  of  the  bitter  lessons  of  this 

(721) 


144  ^^'^  Anuals  of  the  American  Academy 

phase  of  our  evolution,  it  is  but  fair  to  show  an  appreciation  of  its 
benefits. 

The  characteristic  of  this  intermediate  epoch  is  the  very  slight 
introduction  of  the  foreign  element.  To-day  this  element  is  scat- 
tered over  the  land,  but  at  that  time  such  as  were  firmly  rooted  in 
the  country,  principally  in  Buenos  Ay  res,  were  very  few.  Of 
these  the  English  formed  the  greater  part,  for  the  infusion  of  Ger- 
man blood,  which  resulted  from  the  distribution  of  prisoners  taken 
from  the  German  regiments  at  Ituzaingo,  though  th?y  included  some 
estimable  families  constituted  a  very  subordinate  factor.  English 
commerce  was  ahvays  respected  and  in  spite  of  the  bitterness  pro- 
duced by  the  naval  interventions,  it  was  left  to  develop  peacefully. 
But  as  it  did  not  increase  in  volume  and  was  never  reinforced  by 
that  of  other  nations,  it  did  not  become  great.  The  path  of  social 
evolution  was  in  the  direction  of  the  commingling  of  the  city  and 
rural  population,  and  of  the  participation  of  the  gauchos  in  public 
life,  either  by  forming  a  large  and  worthy  element  in  the  army  or 
by  becoming  the  active  nucleus  of  the  popular  civic  movements. 
The  democratization  of  the  country  was  complete,  for  in 
general,  the  upper  classes  of  society  in  the  cities  affiliated 
themselves  with  the  centralist  party,  while  the  populace  supported  the 
federal  party.  Hence  the  bloody  triumph  of  the  latter  brought  about 
its  complete  predominance  and  from  this  period  the  social  and 
political  problems  remained  more  enduring  in  nature,  while 
differences  of  blood  and  tradition  were  put  aside. 

Since  the  constitution  of  1853,  the  social  evolution  of  Argentine 
has  been  guided  and  carried  forward  by  two  factors,  immigration 
and  foreign  capital.  Under  their  influence,  the  characteristics  of  the 
prior  period  were  gradually  modified  to  a  certain  extent.  The 
administration  of  Mitre  struggled  against  the  difficulties  of  inade- 
quate means  of  communication  between  the  distant  cities  and  against 
traditional  custom  of  guerilla  warfare.  Force  was  employed  in 
order  to  remain  master  of  the  field  and  to  break  up  the  resistance 
which  the  men  of  the  interior  set  up  against  the  prominence  of 
those  of  Buenos  Ayres,  and  a  cruel  war  against  Paraguay  was 
undertaken.  The  ability  and  consistency  of  this  Argentine  statesman 
was  great. 

When  the  passions  of  his  contemporaries  had  been  assuaged,  he 
became  the  "grand  old  man"  of  the  nation,  growing  in  stature  as 

(722) 


The   Social    Evolution    of   the   Aryciitinc   Republic         145 

postcrit}'  forms  its  judgment  on  his  policy.  That  administration, 
like  the  following  one  of  Sarmiento,  had  to  cope  with  two 
factors,  the  great  uninhahited  tracts  of  land  and  the  survival  of 
ancient  custom.  On  the  one  hand  the  different  Argentine  regions 
lived  in  isolation  from  one  another,  communication  between  them 
being  difficult ;  on  the  other  hand  there  still  survived  the  custom  of 
local  chieftainship  and  of  the  constant  and  armed  movements  of 
different  political  factions,  who  would  set  out  upon  guerilla  forays  on 
any  pretext  whatsoever,  raising  their  banners  on  high  as  though  their 
behavior  was  patriotic  and  praiseworthy,  whereas  it  was  but  the 
vicious  habit  of  a  barbaric  and  backward  age. 

The  administration  of  Avellaneda  continued  the  task  of 
combating  such  tendencies  by  the  establishment  of  the  telegraph 
which  would  unite  all  these  centers  to  each  other;  by  the  construction 
of  railroads  to  facilitate  communication;  and  by  the  encouragement 
of  European  immigration  for  purposes  of  settlement  and  in  order  to 
mix  other  races  with  that  of  Argentine  and  so  modify  its  political 
idiosyncracies  by  more  conservative  standards  and  interests.  The 
conquest  of  the  Patagonian  wilds,  with  the  final  subjugation  of  the 
warlike  native  tribes  of  the  south,  opened  and  ushered  in  an  era  in 
the  Argentine  evolution.  This  occurred  contemporaneously  with  the 
historic  solution  of  the  problem  of  federalism  versus  centralism, 
which  silenced  forever  the  old  antagonism  between  the  inhabitants  of 
the  metropolis  and  those  of  the  provinces. 

From  1880  till  the  present,  the  work  of  multiplying  the  tele- 
graphs and  railway  routes  has  gone  on,  as  has  also  the  increase  of 
foreign  immigration.  These  have  produced  the  desired  effect  in  the 
social  transformation  of  the  country.  The  telegraph  and  the  rail- 
road have  definitely  killed  the  seditious  germs  of  guerilla  warfare 
and  of  local  chieftainship.  Local  uprisings  are  no  longer  possible. 
The  city  and  rural  populations  have  become  convinced  of  this,  and 
the  popular  mind  is  at  peace  since  the  generation  has  disappeared 
which  saw  the  last  revolts  of  the  gaucJws,  and  other  forms  of 
popular  uprising.  Foreign  capital  commenced  and  encouraged  the 
exploitation  of  our  natural  resources.  The  sugar  industry  of  the 
northern  provinces,  the  wine  culture  of  the  Andes  provinces,  even 
the  stock  raising  and  agriculture  of  the  river  districts  have  been  the 
combined  work  of  these  three  progressive  elements.  Immigration 
has  helped  immensely  toward  this  same  end,  but  the  settlement  of 

(723) 


146  The  Annals  of  the  American  Academy 

new  lands  does  not  advance  by  leaps  and  bounds,  but  spreads 
gradually. 

Starting  from  the  port  of  arrival,  the  stream  of  immigration 
continues  to  spread  clinging  closely  to  the  land  and  little  by  little  it 
mixes  with  the  existing  population,  inter-breeds  with  it,  fuses  with 
it,  and  gives  a  great  surging  impulse  to  agriculture,  industry  and 
commerce.  The  social  transformation  of  the  river  provinces  is  due 
to  this  junction  of  the  two  currents  as  a  result  of  which  the  gaucho 
of  the  metropolis  of  Santa  Fe  or  of  Entre  Rios,  who,  formerly 
famous  for  his  bold  and  lawless  tendencies,  has  to-day  been  so  fused 
with  the  different  foreign  elements  that  all  but  the  memory  of  this 
ancient  type  has  disappeared,  and  the  country  is  covered  over  with 
populous  settlements,  laborious,  prosperous  and  progressive.  The 
great  fertility  of  the  soil  has  returned  with  interest  the  foreign 
capital  which  first  watered  it,  and  has  enriched  marvelously  all  who 
have  engaged  in  its  cultivation.  The  development  of  the  national 
recources,  in  turn,  has  given  birth  to  such  conservative  interests  that 
it  is  incomprehensible  to  the  new  generation  that  the  former  genera- 
tion could,  at  the  signal  of  a  semi-barbarous  chief  jump  on  their 
horses  and,  rushing  over  the  fields,  kill,  pillage  and  destroy.  It  is 
true  that  the  transition  has  been  effected  at  the  cost  of  producing 
a  certain  political  indifference  in  the  new  generations,  which  no 
doubt,  will  be  overcome  in  time. 

The  social  evolution  of  the  Argentine  Republic  has  finally 
found  its  true  channel  and  to-day  is  in  full  course  of  development. 
In  proportion  as  the  foreign  immigration  continues  bringing  there- 
with its  happy  complement  of  foreign  capital,  the  country  will 
continue  to  develop  industrially.  The  astonishing  increase  in 
industries,  with  a  total  production  out  of  all  proportion  to  the 
growing  population,  is  only  explained  by  the  use  on  a  large  scale 
of  the  most  advanced  machinery.  But  such  a  metamorphosis  spreads 
from  the  river  districts  toward  the  interior  of  the  country.  It  does 
not  jump  from  one  point  to  another  without  connecting  links 
between  them,  but  always  preserves  a  channel  through  which  a 
relation  is  maintained  between  the  different  zones  already  trans- 
formed or  in  process  of  transformation.  The  first  effect  of  each 
infusion  of  foreign  blood  into  creole  veins  is  to  appease  the  hot 
political  passions  of  other  times,  abolish  the  old  institution  of  the 
local   chieftainship,   even   blot   him    from   memory   and   replace   it 

(724) 


The   Social   Evolution    of   the   Argentine   Republic         147 

by  an  absorption  in  our  growing  material  interests.  These  material 
interests  appear  to  have  conspired  to  bring  about  that  indifference 
towards  the  state,  as  such,  which  makes  men  look  mistakenly  at  a 
political  career  as  a  profession  which  thrives  off  the  real  working 
classes.  For,  our  government  both  municipal,  provincial  and 
national  appears  to  be  the  heritage  of  a  well-defmed  minority — the 
politicians — who  devote  themselves  to  politics  just  as  other  social 
classes  devote  themselves  to  agriculture,  stock  raising,  industry, 
commerce,  etc. 

Public  life  with  its  complex  machinery  of  elections  and 
governing  bodies  has  been,  so  to  say,  delivered  into  the  hands  of  a 
small  group  of  men  who  at  present  are  not  productive  of  anything 
new  in  the  general  social  situation  of  former  times ;  that  is  to  say, 
these  men  form  a  definite  class,  moved  by  the  influence  of  this  or 
that  personality.  Though  it  has  suppressed  the  bloody  char- 
acteristics of  the  previous  period  it  has  not  relapsed  into  their 
heresies. 

Little  by  little  this  shadow  of  the  old  system  changes  into  that 
of  the  "boss"  of  the  settlement  and  ward.  The  boss  makes  his 
business  that  of  the  mass  of  the  voters,  he  stirs  them  up  from  their 
indifference,  makes  them  go  to  the  polls,  deliberately  falsifies  public 
opinion,  and  so  wins  for  himself  a  political  managership,  which 
gives  him  a  marked  influence  in  the  back  offices  of  officials  and  in 
the  lobbies  of  legislatures.  From  such  methods  there  spring  no  little 
censurable  legislation  of  privilege  and  a  great  loss  of  contentment 
on  the  part  of  the  people.  When  public  spirit  strengthens  and 
shakes  from  itself  the  dust  of  inertia,  and  when  the  laboring  classes 
have  passed  beyond  that  first  stage  of  money  grabbing,  all  the 
inhabitants  of  the  nation  will  commence  to  busy  themselves  about 
the  common  weal.  The  thorn  of  the  "boss"  will  prick  them  and 
they  will  then  be  able  to  form  into  political  parties  with  unselfish 
programs  and  platforms.  Every  voter  will  cast  his  ballot  to  send  to 
the  legislature  candidates  w^ho  uphold  the  principles  of  his  particular 
platform.  As  yet  the  people  have  not  even  reached  the  gateway  to 
this  goal.  The  past  is  still  seen  in  full  process  of  evolution  and  it  is 
not  easy  to  foresee  the  end. 

This  does  not  mean  that  the  present  moment  of  transition  is 
valueless.  On  the  contrary,  it  is  of  very  great  importance,  because 
the  social  situation  in  the  Argentine  Republic  is  in  process  of  making. 

(725) 


148  The  Annals  of  the  American  Academy 

The  politicians,  now  that  they  look  ui)on  themselves  as  called  to 
stand  forth  above  the  heads  of  the  rest  of  the  people,  have  to  be  real 
statesmen.  In  this  historic  period,  such  statesmen,  have  the 
personality  of  the  chauffeur  who  directs  one  of  those  swift  engines 
of  our  century  upon  its  dizzy  course,  the  mechanism  of  which 
is  so  sensitive  to  the  controlling  pressure  of  the  hand  that  it 
can  deftly  avoid  all  accident  or  cause  a  catastrophe  of  fatal  con- 
sequences. There  is  required  in  such  a  man  extraordinary  coolness, 
clearness  of  vision  as  to  responsibility,  perfect  knowledge  of  the 
course  to  be  run,  besides  ceaseless  vigilance,  iron  nerve  when  the 
time  of  trial  arrives  and  a  complete  concentration  upon  the  task. 
The  legitimate  tasks  of  government,  in  this  very  grave  period  of 
Argentine  evolution,  require  a  special  training  on  the  part  of  public 
leaders.  They  must  study  thoroughly  the  problems  of  our  social 
evolution,  and  they  must  form  a  clear  idea  of  the  necessary  solutions. 
Towards  this  they  must  steer  with  undiverted  eye.  The  necessity 
of  further  exploitation  of  our  national  resources,  the  successive 
expansion  of  enterprise  over  zone  after  zone  of  our  territory,  the 
assimilation  of  the  foreign  immigrants  by  the  Creole  population,  the 
slow  formation  of  a  national  spirit  in  the  new  generation,  all  these 
monopolize  for  the  present  the  national  energies  and  prevent  them 
from  turning  to  other  problems.  The  country  is  converted,  as  it 
were,  into  a  giant  boa  constrictor.  It  is  entirely  given  over  to 
the  task  of  converting  its  food  into  nourishment,  of  abstracting  the 
juices  from  the  hard  and  resisting  substances,  of  passing  a  multitude 
of  different  elements  through  its  living  organs  so  that  they  may 
later  form  a  new  tissue,  adapted  to  the  present  and  future  needs  of 
the  country. 

From  this  point  of  view  the  present  moment  in  the  evolution 
of  Argentine  is  of  immense  sociological  interest.  We  are  permitted 
to  be  present  at  the  visible  transmutation  of  a  society,  too  weak  even 
to  direct  itself,  and  absorbed  in  the  fusion  of  different  influences. 
The  direction  of  this  process  has  been  handed  over  without  counter- 
check to  public  men  who  are  obliged  to  dictate  and  put  into  practice 
legislation  and  administrative  rules  of  every  kind,  as  though  they 
enjoyed  absolute  power.  Furthermore,  by  the  very  nature  of  things, 
the  administrative  functions  in  such  periods  have  to  discount  the 
future  and  effect  in  the  present  a  series  of  public  works  or  social 
regulations   which    will   weigh    upon    future   generations    not   only 

(726) 


The   Social   Evolution   of   the   Argentine   Republic         149 

from  the  point  of  view  of  the  general  finances  but  even  from  the 
point  of  view  of  national  character.  The  national  transformation 
of  the  land  with  ports,  canals,  railroads,  telegraphs  and  every 
sort  of  means  of  communication,  indeed,  with  every  kind  of  public 
work,  cannot  be  accomplished  with  present  resources.  A  call  must 
be  made  upon  those  of  the  future,  by  means  of  loans  which  will 
be  a  burden  upon  coming  generations.  If  such  a  governmental 
policy  is  not  accompanied  by  a  skillful  and  prudent  financial  manage- 
ment, the  burdens  of  our  descendants  will  be  considerably  increased. 
They  may  even  be  committed  to  a  policy  that  will  cause  eventual 
bankruptcy  and  an  inevitable  retrogression  in  the  national  develop- 
ment. The  intellectual  metamorphosis  of  the  nation  by  a  proper 
system  of  primary,  secondary  and  higher  education  and  by  special 
schools  of  technical  training,  in  order  to  form  the  national  spirit 
of  the  future  type  of  Argentine  citizen,  is  certainly  our  most  difficult 
governmental  problem,  because  it  is  a  question  of  molding  the 
very  soul  of  the  nation.  To  teach  different  and  contradictory 
systems,  to  do  and  then  undo,  each  day  changing  the  courses  of 
study  to  successively  adopt  antagonistic  standards  and  show  a  real 
lack  of  fixity  in  pedagogic  methods,  is  to  commit  the  greatest  of 
all  crimes,  because  it  is  not  a  crime  against  the  exchequer  of 
posterity  but  against  its  very  soul.  To  accomplish  a  fusion  of  the 
currents  of  foreign  immigration,  to  sort  out  the  best  from  them, 
and  to  direct  the  formation  of  the  new  type  vrhich  is  being  evolved, 
melting  it  in  the  crucible  of  the  school,  of  the  army,  and  of  public 
life,  is  perhaps,  to-day  our  task  of  transcendent  difficulty.  Such  a 
problem  is  greater  than  that  of  directing  the  stream  of  foreign  capital 
which,  while  fructifying  the  national  soil,  clings  to  it  like  the  count- 
less tentacles  of  a  gigantic  octopus  and  absorbs  a  great  part — some- 
times too  great  a  part — of  the  riches  produced  only  to  transmit  them 
through  the  arteries  of  the  Republic,  to  foreign  nations  who  employ 
it  to  their  exclusive  profit. 

Perhaps  no  moment  in  the  history  of  our  nation  requires  a 
greater  combination  of  qualifications  in  its  public  men.  The  student 
may  contemplate  this  most  interesting  transformation,  displayed 
before  his  eyes  like  the  moving  film  of  a  gigantic  cinematograph 
which  permits  him  to  grasp  at  once  the  different  phases  of  the  social 
problem  which  it  presents.  Rarely  in  the  history  of  humanity  has  it 
been  possible  to  contemplate  a  like  spectacle.     The  United  States 

{727) 


150  The  Annals  of  the  American  Academy 

presented  it  a  half  century  ago,  to  the  astonished  gaze  of  men  of  that 
day  who  were  but  little  familiar  with  social  problems.  The 
Argentine  Republic  is  repeating  now  the  same  phenomenon,  with 
this  difference  that  it  can  observe  itself  and  be  guided  by  the 
experience  acquired  elsewhere.  Other  countries  of  the  world,  in 
the  future  will,  no  doubt,  in  their  turn  repeat  a  similar  evolution, 
though  perhaps  in  a  different  environment.  But  the  interesting  part 
of  the  present  moment  is  that  the  Argentine  Republic  is  sailing  upon 
the  same  course  in  the  twentieth  century  that  the  United  States  did 
in  the  nineteenth.  Our  evolution  is  proceeding  with  greater  care 
because  it  is  being  worked  out  amid  better  conditions.  We  can  now 
take  advantage  of  the  costly  experience  gained  by  our  brothers  of 
the  north  and  so  by  avoiding  many  of  their  errors,  seek  to  escape  the 
shoals  upon  which  they  stranded  and  the  mistakes  which  they 
involuntarily  committed,  even  though  we  have  in  our  turn  special 
problems  which  they  did  not  have.  Thus  the  tremendous  politico- 
social  crisis  of  the  North  American  War  of  Secession  will  not  be 
repeated  in  the  southern  hemisphere  and  the  Argentine  social 
evolution  will  not  have  to  solve  the  profound  anthropological 
problem  of  the  rivalry  of  races,  which,  in  the  United  States,  arises 
from  the  white,  black  and  yellow  races,  living  together  side  by  side. 
In  Argentine  there  are  no  ethnic  problems.  The  social 
antagonism  raised  by  an  arrogant  plutocracy  on  the  one  hand 
and  povery  stricken  proletariat  on  the  other,  is  not  presented  as  an 
Argentine  problem,  because  riches  are  still  in  process  of  formation 
there,  and  easily  pass  from  one  hand  to  another.  A  monopoly  of 
riches  cannot  be  prolonged  beyond  a  single  generation  because  with 
the  system  of  compulsory  divison  of  descendants'  estates,  it  soon 
returns  to  the  common  mass  of  the  population.  Social  conditions  in 
our  evolution,  present  distinct  problems  from  those  which  char- 
acterize other  nations  and  demand,  therefore,  a  direct  study  on  the 
ground  and  must  not  be  viewed  through  the  doctrines  developed  in 
other  nations  and  amid  other  conditions.  The  molding  of  the 
national  spirit  by  uniform  and  compulsory  schools  and  the  slow 
adaptation  of  the  mass  of  the  immigrants  to  historical  traditions 
and  to  future  national  aims,  demand  much  time  and  they  are  now 
in  the  full  process  of  being  worked  out.  The  celebration  of  the  Cen- 
tenary of  our  independence  has  made  prominent  the  fact  that  such  an 
evolution  is  much  more  advanced  than  one  would  think.    There  still 

(728) 


The   Social   Evolution   of   the  Argentine   Republic         151 

remains,  nevertheless,  not  a  little  to  be  done  in  this  direction,  though 
the  national  compulsory  school  system  and  the  army  conscription  are 
factors  of  great  importance  which  are  working  for  fusion.  But,  in 
the  country  districts  and  in  those  places  where  the  error  has  been 
committed  of  permitting  the  formation  of  settlements,  homogeneous 
in  race  and  religion,  which  regard  themselves  as  autonomous  off- 
shoots of  their  mother  country,  resisting  the  Argentine  school  or 
any  intermingling  with  the  mass  of  neighboring  population — in  such 
districts,  the  fusion,  though  inevitable,  will  be  necessarily  slower. 

All  these  sociological  problems  might  and  should  have  been 
exhaustively  studied  in  the  history  of  the  United  States  during 
the  nineteenth  century,  a  history  which,  as  I  have  said,  the  Argentine 
Republic  is  repeating  in  the  twentieth.  Foreign  immigration  at 
this  time  has  no  outlet  more  profitable  than  the  River  Plate. 
The  doors  of  North  America  are.  gradually  being  closed,  and  the 
other  regions  do  not  yet  present  the  same  advantages  as  those 
offered  by  our  country.  The  same  thing  that  happens  with  the 
excess  of  population  of  other  nations  also  occurs  with  its  surplus 
capital ;  no  other  quarter  of  the  globe  offers  better  prospects  for 
the  investment  of  capital  and  for  a  greater  rate  of  return.  The 
"manifest  destiny"  of  Argentine  depends  for  the  present  entirely 
upon  the  development  of  its  commercial  relations  with  the  rest 
of  the  world.  It  must  convert  itself  into  the  granary  and  the  meat 
market  of  Europe. 

The  closest  bonds  of  mutual  interest  unite  Argentina  with 
Europe,  because  being  producers  of  unlike  commodities,  the 
European  markets  consume  our  exportation  and  our  markets  con- 
sume theirs.  With  the  rest  of  America  our  interchange  of  trade 
must  be  upon  a  smaller  scale,  because  for  more  than  a  century  to 
come  we  shall  be  countries  producing  similar  commodities.  There- 
fore, our  respective  markets  will  not  reciprocally  serve  to  buy  the 
excess  of  production,  but  only  that  which  by  reason  of  climate  or 
industrial  development  is  to  be  found  or  manufactured  in  any 
other  country  than  our  own.  This  has  happened  to  us  notably  in 
the  case  of  the  United  States  with  its  tremendous  industrial 
expansion.  In  order  to  fulfill  this  "manifest  destiny,"  we  need 
pax  multa  with  the  whole  world.  We  need  to  give  attention 
exclusively  to  our  development  without  intermeddling  in  that  of 
others.      In     this    is  summed    up    everything.      Hence   our    inter- 

(729) 


152  The  Annals  of  the  American  Academy 

national  policy  has  to  be  pacific  and  neutral ;  we  must  be  every 
man's  friend,  and  shun  imperialistic  fancies.  The  "splendid 
isolation"  of  England  fits  her  condition  and  her  inclination.  We 
must  work  and  we  must  be  allowed  to  work.  Our  social  evolution 
still  requires  a  century  to  acquire  a  definite  contour.  Though 
results  may  be  foreseen  from  their  beginnings,  it  is  not  possible 
to  foretell  what  will  be  the  future  Argentine  type,  physically, 
mentally  or  materially. 

For  the  present,  the  only  proper  thing  for  us  to  do  is  to  devote 
ourselves  exclusively  to  the  exploitation  of  our  resources  for  we 
have  seen  how  much  effort  will  be  required  to  assimulate  our 
population,  to  form  a  national  spirit,  to  build  up  a  great  future 
nation,  to  develop  an  administration  which  shall  be  a  model  of 
honesty  and  scientific  preparation,  and  to  adapt  the  republic  to  its 
future  needs  by  public  works  and  institutions,  and  by  showing 
ourselves  firm  in  faitH  and  efifective  in  works. 

The  present  social  tendencies  in  Argentine  evolution  give 
promise  of  a  great  future  for  the  country.  The  nation  is  not 
hesitating  or  vacillating  before  the  realization  of  its  manifest 
destiny.  It  follows  with  profound  interest  the  new  and  colossal 
social  experiment,  which  is  unfolding  to  the  view  of  the  world 
the  different  phases  of  the  formation  of  a  nation  in  whose 
development  the  shoals  are  being  avoided  where  others  were 
wrecked,  and  which  is  putting  into  practice  the  improvements  sug- 
gested by  the  experience  of  the  other  nations  in  order  to  realize 
the  new  evolution  easily,  prudently,  and  successfully. 


{7Z<^) 


COMMERCIAL  RELATIONS  OF  CHILE^ 


By  Hon.  Henry  L.  Janes, 
Division  of  Latin-American  Affairs,  Department  of  State,  Washington. 


The  invitation  to  say  a  few  words  to  you  to-day  on  the  subject 
of  the  commercial  relations  of  the  republic  of  Chile  has  given  me 
genuine  pleasure,  which  is  no  doubt  to  be  ascribed  in  great  part  to 
the  agreeable  recollection  of  the  years  that  it  was  my  good  fortune 
to  serve  in  the  American  diplomatic  service  at  the  capital  of  this 
most  interesting,  sturdy  country.  I  almost  despair  of  being  able 
to  present  to  you  any  thing  beyond  a  few  general  facts  in  the  effort 
to  acquaint  you  in  outline  with  the  Chilean  environment  of  trade,  and 
with  the  purpose  of  suggesting  possible  questions  which  an  interest 
in  this  part  of  the  country  may  indicate,  and  which  I  will  be  happy  to 
endeavor  to  answer. 

I  have  been  greatly  impressed  with  the  significance  of  a  state- 
ment made  to  the  conference  a  few  days  ago  to  the  effect  that 
"trade  follows  the  loan."  The  course  of  west  coast  commercial 
development  lends  confirmation  to  this  statement,  and  I  am  encour- 
aged to  pursue  the  idea  a  step  further  and  to  add  that  trade  follows 
the  loan  and  the  investment.  On  the  west  coast  of  South  America 
both  Englishmen  and  Germans  have  preceded  us  with  the  loan,  the 
investment  of  capital,  and  the  early  cultivation  of  that  enormously 
extensive  field  which  has  hardly  been  broken  by  the  ploughshare  of 
American  enterprise.  The  South  American  republics  occupying 
the  narrow  Andean  region  along  the  Pacific  coast,  constituting  about 
one-sixth  of  the  total  area  of  the  South  American  continent,  with 
about  fourteen  millions  of  people,  possess  a  foreign  trade  of  over 
three  hundred  millions  of  dollars,  of  which  the  United  States  has 
not  more  than  a  tenth  portion.  The  English  merchant  now  enjoys 
the  numerous  advantages  accruing  from  his  early  arrival  here,  and 
the  German,  in  South  America  as  in  other  parts  of  the  world,  has 
shrewdly  grasped  the  opportunities  presented  with  the  vigor  and 
tenacity  characteristic  of  the  the  nation.     And  now,  with  the  proxi- 

lAddress  delivered  at  the  Pan-American  Commercial  Conference,  Washington, 
D.  C,  February  17,  1911. 

(731) 


154  The  Annals  of  the  American  Academy 

mate  completion  of  the  Panama  Canal,  our  competitors  who  have 
preceded  us  thither  turn  to  the  north  and  labor  industriously  to 
strengthen  themselves  behind  the  ramparts  of  trade,  the  loan  and  the 
investment,  to  meet  the  inevitable  incursion  of  American  commercial 
undertakings.  Everyone  who  has  faith  in  the  sterling  intelligence 
and  resourcefulness  of  our  people,  and  who  has  seen  the  superior 
quality  of  the  American  article,  cannot  fear  the  ultimate  result  in 
the  coming  struggle ;  but  it  should  not  be  forgotten  that  we  must 
learn  the  lesson  taught  by  the  experience  of  those  who  have  preceded 
us  in  this  field,  and  devote  ourselves  to  a  careful,  scientific  study 
of  the  peculiar  conditions  while  in  search  of  the  means  and  ways  that 
will  enable  us  to  fulfil  the  requirements  that  constitute  success  in  an 
environment  so  different  from  that  in  which  we  live. 

One  of  the  first  things  that  a  traveler  passing  down  the  Pacific 
coast  notes  is  the  lack  of  harbor  facilities.  There  are  only  one 
or  two  natural  ports.  The  ship  rides  at  anchor  usually  some  dis- 
tance from  shore  in  the  open  roadstead.  Enormous  sums  of  money 
are  yet  to  be  expended  to  provide  the  facilities  which  modern  com- 
merce demands.  Callao  and  Valparaiso  are  to-day  the  only  west 
coast  cities  provided  with  wharves  permitting  the  discharge  of  ves- 
sels under  the  most  favorable  conditions.  In  the  other  ports,  the 
cargo  is  unloaded  at  an  anchorage  many  yards  from  the  shore 
by  lighters  brought  alongside.  To  one  who  has  had  some 
experience  with  the  most  unpacific  Pacific  ocean,  the  importance  of 
this  fact  in  its  bearing  upon  the  matter  of  packing,  loss  and  inci- 
dental expense,  is  at  once  apparent.  But  both  Chile  and  Peru  are 
keenly  alive  to  the  needs  of  the  present  situation,  and  are  making 
every  effort  to  be  prepared  to  handle  the  great  increase  in  the  vol- 
ume of  trade  that  will  soon  flow  to  their  shores  through  the  Panama 
canal.  At  Valparaiso,  San  Antonio,  Talcahuano,  Corral,  jMejillones, 
and  along  the  Peruvian  coast  plans  of  harbor  improvements  are 
being  consummated  and  executed  with  this  purpose  in  view. 

Just  a  word  upon  a  matter  that  has  several  times  been  brought 
up  in  the  form  of  questions  from  delegates — the  element  of  popula- 
tion and  language.  Some  persons  manifest  considerable  surprise 
when  the  term  Spanish  as  applied  so  generally  and  loosely  to  South 
America  is  objected  to  as  inapplicable,  just  as  we  might  properly 
resent  being  called  Englishmen.  Of  course,  Brazil  is  composed  of 
a  population  for  the  most  part  of  Portuguese  origin.     On  the  west 


Commercial  Relations  of  Chile  155 

coast  the  Spanish  language  is  universally  spoken  in  all  the  civilized 
centers,  but,  although  the  ethnic  origin  of  this  part  of  the  world  is 
essentially  Iberian,  any  one  who  takes  this  fact  without  many  qual- 
ifications exposes  himself  on  the  ground  to  a  multitude  of  surprises. 
Thirty-four  per  cent  of  the  Chilean  population  is  composed  of  a 
non-Spanish,  European  stock  which  has  been  assimilated  and  welded 
fnto  one  homogeneous  mass  possessed  of  the  sturdy,  enterprising 
qualities  that  distinguish  that  admirable  race.  The  South  American 
properly  regards  himself  as  possessing  as  many  distinctive  marks  of 
nationality  that  distinguish  him  from  the  citizen  of  the  mother 
country  as  does  the  American. 

One  who  returns  from  South  America  is  often  asked  in  the  most 
matter-of-fact  tone :  ''Tell  me  something  about  revolutions  you 
observed  when  stationed  at  your  last  post."  During  a  residence  of 
almost  five  years  in  the  southern  hemisphere,  I  am  then  obliged 
to  say,  I  have  never  seen  the  specter  so  decked  out  with  the  parapher- 
nalia of  melodramatic  exaggeration  by  the  facile  pen  of  our  well- 
informed  press,  nor,  what  appears  to  give  cause  for  even  greater 
astonishment,  do  I  possess  the  cynicism  of  those  who  have  acquired 
the  pessimism  of  Hamlet  while  brooding  over  the  so-called  spirit 
of  manana  because  they  have  not  been  able  to  delve  deeper  than 
superficial  appearances.  For  eighty  years  Chile  has  been  living 
under  a  constitution,  the  terms  of  which  have  been  modified  only  by 
constitutional  means ;  and  during  a  period  of  fifty  years  she  has 
known  but  one  revolution,  which,  like  our  own  civil  war,  came  to 
life  in  violent  assertion  of  constitutional  principles  of  which  modern 
political  science  takes  practical  and  serious  account.  Both  Chile  and 
Peru  are  making  rapid  advance  in  the  most  modern  directions  under 
their  stable  and  enlightened  form  of  governmental  administration. 

Chilean  foreign  trade  during  the  past  year  amounted  to  over 
$200,000,000,  which  is  only  slightly  less  than  Mexico's  total  com- 
merce with  foreign  countries,  and  places  Chile  in  the  third  rank 
as  to  South  American  total  trade  figures.  The  United  States  sells 
only  about  ten  per  cent  of  the  total  amount  purchased  abroad  by 
Chile;  and  buys  about  fourteen  per  cent  of  what  Chile  has  to  sell. 
Computing  Chile's  population  at  three  and  one  half  millions,  each 
person  sells  to  us,  according  to  the  last  statistical  reports  available, 
$4.60  worth  of  goods,  and  buys  from  us  about  $2.75  of  commodities. 
The  figures  of  Chile's  foreign  trade  show  a  favorable  balance  of 

(733) 


156  The  Annals  of  the  American  Academy 

more  than  twenty-three  millions  of  dollars.  Saltpeter  takes  about 
one-third  of  the  total  exportation  and  provides  about  65  per  cent  of 
Chile's  national  income.  The  United  Kingdom  comes  in  for  the 
largest  share  of  Chilean  trade,  Germany  following  closely  and 
greatly  out-distances  the  United  States. 

It  will  be  of  interest  to  you  to  note  that  Chile  admits  free  of 
duty  the  important  elements  of  industrial  ^development — machinery, 
fuel,  tools,  and  materials.  Her  chief  exports  are  nitrate,  copper, 
hides,  furs  (chinchilla),  wines,  silver,  and  iron.  She  also  exports 
considerable  quantities  of  grain,  bran,  peas,  rye,  and  middlings. 
Some  American  agricultural  machinery  is  to  be  found  in  the  Chilean 
market,  and  the  trade  in  threshers,  seeders,  mowers,  and  reapers, 
although  greatly  limited  naturally  by  the  reduced  agricultural  area 
in  Chile,  is  good. 

In  common  with  other  South  American  countries,  Chile's 
manufacturing  industry  has  not  yet  reached  a  point  of  development 
which  makes  it  probable  that  the  foreign  trade  in  manufactured 
articles  will  be  threatened  for  many  years  in  the  future.  The 
Government  has  made  strenuous  efforts,  and  with  some  success,  to 
establish  branches  of  the  manufacturing  industry  upon  national 
soil ;  but  the  greatest  difficulties  encountered  still  remain — the  lack 
of  capital  and  the  reduced  number  of  competent  workmen  avail- 
able. In  the  meantime,  the  market  is  there  to  be  developed  almost 
without  restraint.  IManufactures  of  brick,  floor  tile,  cement,  clothes, 
hats,  shirts,  collars,  print  goods,  different  kinds  of.  iron  work,  leather, 
carriages  and  wagons,  cigars  and  cigarettes,  matches,  etc.,  are 
doing  a  profitable  business  in  the  country.  The  raw  material  fur- 
nished by  the  country  is  fully  adequate  to  supply  all  domestic  needs. 
Industrial  Chile  has  now  fully  recovered  from  the  terrible  results 
of  the  wild  speculation  of  1905-6  and  the  great  earthquake  of  August 
1906,  when  the  hand  of  death  and  destruction  fell  heavy  on  the 
rich  central  zone.  This  general  improvement  speaks  eloquently 
for  the  recuperative  powers  of  the  Chilean.  Good  crops  have  come 
to  help  him  and  the  acreage  of  cultivated  land  has  increased  almost 
one  and  one-half  million  acres  in  the  past  twelve  months.  The  more 
general  use  of  nitrate  and  other  fertilizers  and  the  introduction  of 
improved  machinery  and  up-to-date  methods  have  given  splendid 
results  on  every  hand.  Chile  exports  about  5,000,000  bushels  of 
wheat,  produced  at  an  acreage  of  fourteen  bushels  per  acre  on 

(734) 


Commercial  Relations  of  Chile  157 

approximately  2,500,000  acres.  In  the  south  of  Chile  there  are 
abundant  forests  of  excellent  timber.  Owing  to  the  lack  of  facili- 
ties of  transportation  and  the  unquestionable  speculative  character  of 
many  of  the  companies  organized  to  exploit  the  timber  wealth  of 
this  region  which  disappeared  before  the  great  crisis  of  a  few 
years  ago  like  the  dry  blade  before  the  prairie  fire,  little  has  really 
been  done  to  bring  this  wealth  within  reach  of  the  great  centers 
of  population.  But  much  is  certainly  to  be  done  in  the  future.  It 
may  surprise  many  to  be  told  that  Chile  has  more  forests  to  its 
area  than  any  other  country  in  the  world. 

I  have  always  found  the  northern  provinces  of  Chile,  from 
the  Peruvian  frontier  to  the  southern  limits  of  the  Antofagasta 
Province,  which  came  to  Chile  as  the  fruit  of  her  victories  in  the 
war  of  1879  with  Peru  and  Bolivia,  to  be  the  most  interesting 
part  of  the  Republic.  There  lie  the  most  extensive  nitrate  beds  in 
the  world.  In  all  the  great  stretch  of  country  from  the  Andes 
to  the  Pacific  Ocean  rain  never  falls.  Not  a  blade  of  green  is  to  be 
seen  except  in  depressions  where  the  saline  waters  have  seeped 
through  from  the  great  cordillera  or  along  a  few  streams  like  the 
river  Loa,  whose  brackish  waters  flow  between  the  bare  hills  and 
over  the  sandy  plains  furrowed  by  the  rush  of  torrents  of  far- 
distant  geologic  ages. 

The  chief  ports  of  this  region  are  Iquique,  with  forty 
thousand  inhabitants,  the  present  center  of  the  nitrate  industry; 
Antofagasta,  with  almost  thirty-three  thousand  inhabitants;  Taltal, 
a  port  of  about  eleven  thousand,  from  which  copper  and  silver  and 
nitrate  of  Cachinal  are  shipped.  These  nitrate  provinces  have  a 
population  of  about  three  hundred  thousand,  distributed  mostly 
in  the  larger  cities  of  the  coast,  in  the  nitrate  plants,  and  in  the 
mines  of  copper  and  silver  in  the  interior.  The  entire  population  is 
dependent  upon  the  nitrate  industry,  in  which  fifty  thousand  men 
are  employed,  belonging  mostly  to  the  rugged  lower  Chilean 
class,  the  so-called  "Roto,"  with  a  great  many  Bolivian  Indians 
and  a  considerable  proportion  of  Peruvians.  In  1909  over  eighty- 
four  million  hundredweight  of  nitrate  were  produced  and  the 
industry  is  doing  at  present  well  with  an  improvement  in  the  market 
quotations  and  the  great  increase  in  the  w^orld  consumption  of  the 
product.  The  nitrate  combination  which  since  the  war  of  the  Pacific 
has  controlled  the  exportation  of  nitrate   from   Chile,  and  which 

(735) 


158  The  Annals  of  the  American  Academy 

was  under  the  special  protection  of  the  Chilean  Government  for 
the  purpose  of  controlling  prices,  came  to  an  end  about  a  year  ago 
and  has  not  since  been  renewed,  and  conditions  have  remained  very 
satisfactory.  Indications  are  to  the  effect  that  a  good  profit  has  been 
realized  in  spite  of  augmented  production.  About  forty  per  cent 
of  the  total  number  of  firms  engaged  in  this  business  are  English, 
followed  closely  by  the  Chileans  with  a  quota  of  production  almost 
equal  to  that  of  the  British.  Germany  has  lately  entered  the  field 
with  great  strength  and  now  claims  eleven  per  cent  of  the  total 
saltpeter  output.  American  capital  has  within  the  last  two  or 
three  years  purchased  some  valuable  properties  and  it  is  hoped 
others  may  enter  the  field,  as  the  opening  is  a  good  one.  The  use 
of  nitrate  for  agricultural  purposes  in  the  world  at  large  is  being 
more  thoroughly  appreciated  and  in  the  United  States  the  impor- 
tations have  almost  quadrupled  in  the  last  four  years. 

Certainly  one  of  the  great  obstacles  encountered  in  the  past 
to  the  healthy  development  of  trade  with  Chile  has  been  the 
instability  of  the  Chilean  circulating  medium.  The  Chilean 
merchant  pays  for  the  foreign  commodity  on  a  gold  basis,  but  his 
customers  buy  the  goods  in  the  irredeemable  paper  currency. 
During  the  short  tinie  in  which  I  was  in  Chile  I  saw  the  value  of 
the  paper  currency  fall  from  about  thirteen  and  a  half  pence  to  eight 
pence  when  the  crisis  following  the  great  earthquake  and  the  effects 
of  universal  and  unrestrained  speculation  had  brought  anarchy  into 
the  Chilean  market.  You  will  be  interested  to  know  that  for  some 
years  the  value  of  the  Chilean  peso  has  remained  between  the 
extremes  of  ten  and  eleven  pence  and  that  the  future  of  the 
Chilean  currency  is  a  bright  one,  making  for  that  stability  which 
affords  every  encouragement  to  the  proper  normal  improvement  of 
commercial  relations. 

Chile  has  a  parcels  post  convention  with  the  United  States  and 
the  amount  of  business  transacted  under  the  terms  of  this  agreement 
is  steadily  increasing,  with  the  special  advantages  such  an 
arrangement  presents  to  the  exporter.  The  customs  regulations 
of  Chile  are  ably  administered  and  the  officials  are  unusually 
obliging  and  accommodating  toward  shippers,  but  a  shipment  fol- 
lowing the  usual  course  requires  the  attention  of  a  customs  broker 
and  may  sometimes  be  held  up  many  weeks  in  the  congestion  of 
traffic  in  the  warehouses  at  the  port.    The  advantage  of  the  parcels 

(736) 


Commercial  Relations  of  Chile  159 

post  lies  in  the  fact  that  the  consignment  goes  directly  to  the 
consignee  without  the  intervention  of  the  custom  house  broker 
and  may  be  opened  with  a  small  charge  of  a  few  cents  for  the 
making  out  of  papers  and  inspection  on  the  basis  of  details  furnished 
to  the  postmaster  here  covering  the  weight  in  kilos.,  value  and  kind 
of  goods.  The  trade  by  the  parcels  post  shows  a  steady  and  con- 
siderable increase.  During  1909  merchandise  to  the  value  of  about 
$950,000  American  currency  entered  Chile  through  this  channel, 
of  which  the  United  States  has  not  yet  taken  more  than  ten  per 
cent. 

As  regards  trade  representation  along  pioneer  commercial 
lines,  there  are  only  a  few  manufacturers'  representatives  active  in 
Chile,  and  there  are  several  commission  houses  doing  business  on  the 
basis  of  two  and  a  half  to  five  per  cent.  Undoubtedly  the  facilities  for 
the  extension  of  trade  offered  by  the  firms  already  established  in 
the  field  are  great,  but  the  sphere  for  the  development  of  trade 
through  the  medium  of  commercial  travelers  is  one  that  should 
be  carefully  examined.  Before  sending  a  representative  to  Chile 
the  most  conservative  and  safest  way  undoubtedly  is  to  go  down  to 
the  country  and  look  over  the  field  of  possible  opportunity  and  then, 
if  the  results  of  this  investigation  are  favorable,  to  send  a 
representative  down  to  make  a  personal  canvass. 

Here  something  ought  to  be  said  regarding  the  qualities  that 
make  for  the  efficiency  of  the  representative.  The  South  American 
has  susceptibilities  which  are  as  strong  as  our  own,  but  which  soine- 
times  manifest  themselves  in  a  rather  unexpected  way,  and  along 
quite  different  lines  from  those  we  instinctively  anticipate  in  the 
United  States.  Except  in  Valparaiso,  English  is  little  spoken  in 
the  trade  centers  of  Chile,  and  no  one  should  go  to  South  America 
with  the  idea  of  covering  the  entire  situation  without  possessing  a 
knowledge  of  Spanish,  and  without  a  clearly  marked  disposition 
to  take  serious  account  of  differences  of  habit  which  are  as  rational 
and  well  founded  to  the  South  American  mind  as  they  appear 
unjustified  and  even  absurd  through  the  spectacles  of  American 
training. 


{7Z7) 


CLOSER  COMMERCIAL   RELATIONS   WITH   LATIN- 
AMERICA 


By  Bernard  N.  Baker, 

Baltimore,  Md. 


The  following  suggestions  for  the  development  of  our  relations 
with  the  countries  of  Latin-America  might  be  offered: 

The  first  and  most  important  question  of  policy  for  our  country 
to  pursue  is  the  securing  of  the  confidence  of  our  sister  republics  in 
the  south  by  carrying  out  in  spirit  as  well  as  in  letter  any  agreements 
or  treaties  we  may  make  with  them  or  with  other  nations.  In  this 
connection  it  may  be  said  that  the  action  of  our  government  in 
acquiring  from  the  Republic  of  Panama  the  right  to  build  the 
Panama  Canal  was  not  above  reproach.  At  the  time  we  took  over 
through  purchase  from  the  French  company  the  rights  that  belonged 
to  them,  there  can  be  no  question  but  that  we  encouraged  the  citizens 
of  the  Republic  of  Panama  to  secede  from  the  United  States  of 
Colombia  so  that  we  might  secure  through  treaty  with  the  new 
Republic  the  rights  necessary  to  enable  us  to  carry  forward  the 
great  work  of  building  the  Panama  Canal.  Although  the  undertak- 
ing and  putting  through  of  the  canal  was  of  prime  importance,  the 
way  in  which  the  transaction  was  accomplished  is  not  an  episode  of 
which  we  should  be  too  proud.  Looked  at  from  the  broadest  aspect 
of  our  international  obligations,  our  action  was  not  above  criticism. 
Colombia  was  unjust  and  unreasonable  and  expected  to  secure  from 
the  United  States  undue  advantages  and  compensation,  but  this 
did  not  justify  us  in  acquiring,  practically  by  force  through  our 
superior  resources,  what  should  have  been  acquired  by  treaty  agree- 
ment. We  should  now  seek  to  establish  closer  commercial  rela- 
tions with  the  Republic  of  Colombia,  even  to  the  extent  of  con- 
ceding to  it  some  advantages  in  the  use  of  the  Panama  Canal, 
such  as  including  its  coastwise  commerce  as  we  do  that  of  the 
Republic  of  Panama  in  the  free  use  of  the  canal.  For  Colombia 
likewise  has  a  large  coast  line  on  both  the  Pacific  and  Atlantic  oceans. 

By  treating  Colombia  in  this  magnanimous  spirit  we  would  lead 
the  other  Latin-American  republics  to  believe  that  they  can  always 
depend  on  the  fairness  and  justness  of  our  country. 

Second:    We  entered  into  a  treaty  with  Great  Britain  in  good 

(738) 


Closer  Commercial  Relations   With   Latin-America         i6i 

faith  that  no  concessions  would  be  made  in  the  use  of  the  Panama 
Canal  to  the  ships  of  any  nation  that  were  not  equally  extended  to 
the  ships  of  all  nations.  This  implied,  certainly  on  our  part,  a  moral 
obligation  that  in  the  foreign  commerce  of  the  world,  and  our  own 
included,  we  would  take  no  undue  advantage  of  our  rights  in  the 
Panama  Canal.  This  clause  in  our  treaty  was  a  mistake.  The 
United  States  in  spending  the  millions  necessary  to  build  this  canal 
should  have,  as  regards  its  foreign  commerce,  some  advantages 
because  of  this  enormous  expenditure.  It  is  very  doubtful  whether 
the  canal  will  ever  be  profitable  directly  from  tolls,  or  pay  anything 
like  a  fair  per  cent  upon  this  enormous  cost — at  least  for  a  great 
many  years  to  come. 

A  number  of  bills  have  been  introduced  in  Congress  to  give 
free  tolls  to  ships  under  our  own  flag  engaged  in  foreign  commerce. 
We  have  a  perfect  right  to  give  free  tolls  to  ships  engaged  in  our 
coastwise  commerce.  But  everyone  must  concede  that  Congress 
should  do  nothing  which  might  in  any  way  be  construed  as  a 
violation  of  this  treaty  agreement.  We  should  therefore  discuss 
the  matter  frankly  with  England  before  we  take  any  action  of  that 
kind.  It  is  possible  that  by  so  doing,  we  might  secure  a  modification 
of  an  unfortunate  agreement  and  thus  obtain  relief  without  any 
arbitrary  action.  The  confidence  which  our  sister  republics  have  in 
our  integrity  would  be  strengthened  by  such  action  and  they  would 
be  willing  in  the  future  to  trust  us  more  extensively. 

Third :  A  most  important  feature  to  encourage  the  develop- 
ment of  closer  commercial  relations  will  be  the  establishment  of  such 
regular  lines  of  communication  in  steamships,  under  our  own  flag, 
as  will  carry  to  the  ports  of  South  America  some  evidence  upon 
which  to  base  a  belief  that  w^e  are  a  maritime  and  exporting  nation. 
I  know  in  some  of  the  countries  of  South  America  they  do  not 
believe  we  can  build  and  run  ships ;  they  think  that  we  are  not  a 
maritime  nation.  Other  nations,  such  as  Japan,  come  to  them  and 
show  them  by  actual  demonstration,  in  the  ports  of  their  country, 
ships  built,  owned  and  manned  by  the  Japanese  under  the  Japanese 
flag.  I  allude  now  particularly  to  ports  on  the  west  coast.  The  same 
would  be  true  of  all  ports  on  the  eastern  coast,  where  seldom,  if 
ever,  is  the  American  flag  seen  on  a  ship  of  our  country.  Conse- 
quently it  is  hard  for  the  nations  of  South  America  to  realize  that 
the  United  States  can  build  ships. 

(739) 


i62  The  Annals  of  the  American  Academy 

Fourth  :  The  establishment,  by  citizens  of  the  United  States, 
of  banking  facilities  throughout  our  Latin-American  republics  will 
be  of  inestimable  benefit.  This  is  not  a  question,  of  course,  for  the 
United  States  Government  to  take  up,  but  it  is  a  question  that  I 
think  will  be  very  largely  influenced  by  the  establishment  by  the 
government,  on  whatever  lines  are  fair  and  just,  of  regular  steamship 
communication  under  the  flag  of  our  country. 

Fifth:  To-day  the  conditions  existing  in  Mexico  afford  us 
a  striking  example  of  the  evils  that  may  arise  from  a  lack  of  proper 
understanding  of  all  the  conditions  that  go  to  make  up  closer  rela- 
tions between  the  two  countries.  The  Republic  of  Mexico  for  many 
years  has  offered  opportunities  and  complete  protection  to  citizens  of 
the  United  States  wishing  to  make  investments  for  the  development 
of  its  country,  and  a  large  amount  of  capital  has  been  invested  in 
Mexico,  in  many  cases  with  very  beneficial  results  to  the  citizens 
of  both  countries.  At  the  same  time  we  have  entirely  neglected 
means  of  communication  by  regular  lines  of  steamers  under  our 
own  flag,  and  the  result  has  been  that  we  find  another  nation,  Japan, 
studying  out  how  she  may  wisely  and  efficiently  develop  closer  com- 
mercial relations  with  the  Republic  of  Mexico  by  establishing  lines 
of  steamers  under  her  own  flag. 

A  great  deal  of  the  present  discussion  in  the  press  has  been 
brought  about  by  the  establishment  of  lines  of  steamers  under  the 
Japanese  flag  at  Salina  Cruz  and  a  concession  by  the  Mexican  Gov- 
ernment to  this  line  of  $5,000  a  voyage.  Mexico  has  given  to  an 
American  steamship  line.  The  American-Hawaiian  Steamship  Com- 
pany, a  special  guarantee  against  loss  for  a  line  across  the  Isthmus 
of  Tehuantepec. 

Thus  we  see  the  remarkable  situation  of  an  American  line  of 
steamers  receiving  aid  from  the  Mexican  Government,  and  also 
a  Japanese  line  whose  interests  are  so  directly  opposed  to  our  own; 
particularly  in  the  development  of  the  Pacific  coast  trade.  The 
United  States  should  so  encourage  our  merchant  marine  as  to  obviate 
the  need  of  establishing  these  close  relations  with  Japan.  Were 
there  facilities  under  the  American  flag,  the  Republic  of  Mexico 
would  be  glad  to  extend  to  us,  instead  of  extending  to  Japan,  such 
assistance,    and   thus   draw   closer  our   commercial    relations. 

There  is  justification  for  the  belief  that  regular  lines  of  com- 
munication with  Latin-America  by  steamers  under  our  own  flag 

(740) 


Closer   Commercial  Relations   With  Latin-America         163 

would  develop  closer  relations.  In  this  connection  the  President  of 
the  United  States  in  his  message  of  December,  1909,  spoke  as 
follows : 

"I  earnestly  recommend  to  Congress  the  consideration  and  pas- 
sage of  a  ship  subsidy  bill  looking  to  the  establishment  of  lines 
between  our  Atlantic  seaports  and  the  east  and  west  coast  of  South 
America  as  well  as  lines  from  the  west  coast  of  the  United  States  to 
South  America." 

Presidents  McKinley  and  Roosevelt  both  recommended  such 
legislation;  as  did  also  Postmasters  General  Cortelyou,  Meyer  and 
Plitchcock ;  Secretaries  of  Commerce  and  Labor  Cortelyou,  Straus, 
Metcalf  and  Nagel ;  also  Admiral  Dewey,  President  of  the  General 
Board  of  the  Navy  Department.  Of  the  organizations:  The  National 
Board  of  Trade,  National  Association  of  Manufacturers,  The  Amer- 
ican Bankers'  Association,  The  American  Cotton  Manufacturers' 
Association,  and  the  boards  of  trade  and  chambers  of  commerce  of 
the  principal  cities  of  the  United  States.  By  adopting  resolutions 
they  endeavored  to  encourage  the  establishment  of  regular  Amer- 
ican lines  of  mail  steamers  to  South  America.  As  to  foreign  coun- 
tries, and  especially  via  the  Panama  Canal,  Spain  has  provided  by 
law  for  compensation  of  $1.90  a  mile  for  steamers  of  thirteen  knots 
from  Barcelona  to  the  west  coast  of  South  America  and  to  San 
Francisco  through  the  canal  when  completed.  A  bill  is  pending  in 
the  Italian  Parliament  for  a  similar  compensation.  Japan  has 
already  established  a  line  to  the  west  coast  of  South  America. 
I  should  like  to  quote  the  following  report  of  Mr.  C.  J.  Arnell : 

"A  subsidy  of  690,511  yen  annually  for  five  years  is  provided 
for  a  Japanese  line  to  South  America.  There  are  to  be  six  voyages  a 
year,  so  the  subsidy  amounts  to  $57,000  a  round  voyage  of  25,000 
miles,  or  as  near  as  may  be  $4.60  per  nautical  mile  outward  bound. 
This  is  the  rate  paid  to  twenty  knot  mail  steamships  of  8,000  tons 
or  over  under  our  ocean  mail  act  of  189T.  The  Japanese  ships, 
however,  are  to  be  only  thirteen  knots  and  range  from  5,200  to  9,300 
tons."  In  his  admirable  report  on  the  Japanese  legislation  of  1909 
(S.  Doc.  152,  6ist  Cong.,  ist  sess.)  Mr.  C.  J.  Arnell,  of  our  embassy 
at  Tokyo,  says  of  this  South  American  line :  "The  government's 
proposal  to  open  a  regular  line  to  South  America  met  with  severe 
opposition  in  the  Diet  and  considerable  criticism  from  the  press  on 
the  general  grounds  that  it  was  contrary  to  the  new  policy  of  finan- 

(741) 


164  The  Annals  of  the  /Uncrican  ^-Icademy 

cial  retrenchment  to  subsidize  an  enterprise  whose  immediate  under- 
taking was  not  essential,  and  which  did  not  promise  to  be  profitable 
for  some  years  to  come.  As  already  reported,  however,  the  govern- 
ment seemed  to  attribute  more  than  ordinary  importance  to  the  line 
and,  after  vigorous  action,  succeeded  in  effecting  a  compromise  with 
the  Diet  whereby  the  subsidy  for  the  present  year  (about  500,000 
yen)  was  retained  in  the  budget.  There  is  no  evidence,  however, 
to  show  that  the  motive  for  the  establishment  of  the  line  is  more 
than  purely  commercial,  and  the  general  opinion  seems  to  be  that 
'  it  is  the  outcome  of  investigations  recently  made  in  South  America 

by  Mr.  Uchida,  director  of  the  commercial  marine  bureau.  The 
immediate  subsidizing  of  the*  line  was  evidently  desired  in  order  to 
participate  in  what  is  believed  to  be  a  promising  field — the  proposed 
establishment  of  regular  steamship  services  by  the  Hamburg-Amer- 
ican, Norddeutscher-Lloyd,  and  a  certain  Chinese  company.  The 
new  Japanese  line  will  make  regular  calls  at  Hongkong,  Moji, 
Kobe,  Yokohama,  Honolulu,  Salina  Cruz  and  Mazanillo  (Mexico), 
Callao  (Peru),  and  Iquique  and  Valparaiso  (Chile)." 

"On  October  25,  1909,  a  bill  was  passed  in  the  Mexican  Con- 
gress to  grant  from  the  Mexican  treasury  to  this  Japanese  line  a 
subsidy  of  10,000  pesos  ($5,000)  a  voyage,  or  $60,000  annually. 

"For  fourteen  knot  steamers  to  Argentina,  once  a  month,  Spain 
is  willing  to  appropriate  at  the  rate  of  $4.60  a  nautical  mile  outward, 
the  same  rate  as  for  sixteen  knot  American  steamships  defeated 
in  the  House  of  Representatives  last  March.  The  recent  subsidy 
legislation  of  other  countries  in  fact  shows  that  various  shipping 
P  '  propositions   which   have  passed  the   Senate  of  the  United   States 

during  the  past  ten  years,  and  failed  in  the  House,  have  been  studied 
elsewhere  and  that  some  of  their  features,  adapted  to  varying 
national  conditions,  have  been  incorporated  in  the  laws  of  other  coun- 
tries. Spain  has  already  provided  for  a  subsidized  line  through  the 
Panama  Canal." 

So  important  does  this  question  of  the  establishment  of  lines 
of  steamers,  under  the  flags  of  their  own  countries,  appear  to 
foreign  nations  that  to-day  they  are  spending  over  $49,000,000  per 
annum  for  this  purpose.  We  are  doing  little  or  nothing  with  the 
Latin-American  countries,  where  the  greatest  opportunity  to-day 
exists  for  the  development  of  our  export  business. 

(742) 


IMMIGRATION— A  CENTRAL  AMERICAN  PROBLEM 


By  Ernst  B.  Filsinger, 
Consul  of  Costa  Rica  and  Ecuador,  St.  Louis,  Mo. 


No  problem  confronting  the  five  Central  American  Republics 
is  of  more  vital  import  than  that  of  immigration.  In  its  considera- 
tion the  student  of  international  economy  must  quickly  realize  that 
the  future  of  those  nations  will  be  materially  shaped  by  its  correct 
solution. 

This  conclusion  is  borne  home  to  the  earnest  observer  of 
political  affairs  of  Central  America  in  remembering  their  experi- 
ences with  problems  which  have  been  brought  about  entirely  by 
immigrants.  Indeed,  their  political  entity  has  not  infrequently  been 
threatened  by  developments  which  directly  resulted  from  complica- 
tions caused  by  the  immigrants  from  Europe  or  America.  Fear  of 
intervention,  the  "bugaboo"  of  every  patriotic  Latin-American,  is 
omnipresent  and  is  a  factor  to  be  seriously  reckoned  with  in  the 
consideration  of  the  subject  of  this  article. 

In  connection  with  the  growing  interest  in  Latin-American 
affairs  throughout  the  United  States,  North  Americans  have  an 
interest  in  the  proper  working  out  of  the  general  subject  hardly 
second  to  that  of  the  people  of  the  Central  American  Republics. 
This  is  attributable  not  only  to  the  growth  of  international  com- 
merce, but  more  particularly  in  view  of  its  relation  to  the  general 
American  policy  towards  Latin-America.  The  development  of  great 
American  industrial  corporations  which  have  extended  their  opera- 
tions to  Central  America  is  another  factor.  This  is  due  to  the  fact 
that  innumerable  employees  of  such  corporations  have  found  it 
necessary  to  establish  their  homes  in  the  Central  American 
Republics.  It  will  be  observed  that  the  character  of  these  men, 
their  relations  with  the  local  and  national  officials  of  the  various 
republics  and  their  recognition  of  the  local  customs  will  tend  greatly 
to  shape  the  destiny  of  those  countries.  The  solution  of  the  prob- 
lems arising  out  of  the  concessions  to  such  enterprises,  the  treatment 
of  foreign  investments  generally  and  the  immigration  of  their 
employees  will  engage  the  thought  of  all  earnest  and  serious  gov- 

(743) 


i66  The  .binals  of  the  American  Academy 

ernment  officials  of  Central  America.  Not  infrequently  has  it  hap- 
pened that  serious  international  disputes  have  arisen  with  foreign 
corporations  and  their  representatives  regarding  the  interpretation 
of  the  laws  relative  to  concessions,  and  disinterested  observers  have 
often  attributed  the  blame  to  the  local  representatives  who  by  their 
antipathy  to  the  customs,  laws  and  ideals  of  the  nation  provoked 
disputes  which  might  otherwise  easily  have  been  avoided  by  the 
show  of  a  little  tact  or  judgment  on  the  part  of  the  foreigners.  In 
this  connection  it  is  interesting  to  note  that  to  Americans  has  been 
attributed  the  greatest  criticism  for  such  abuses.  It  can  be  readily 
seen,  therefore,  why  the  statesmen  of  Central  America  should  be 
concerned  with  the  coming  into  their  midst  of  an  element  which 
may  prove  on  the  one  hand  a  most  potent  factor  in  the  development 
of  their  resources,  in  the  administration  of  their  laws  and  in  the 
general  enlightenment  of  the  people,  while  on  the  other  hand  it 
may  prove  a  most  serious  and  disturbing  factor. 

Another  phase  of  this  question  is  represented  in  the  agitation 
relative  to  the  exclusion  of  the  oriental  races.  In  the  light  of  recent 
developments  the  attitude  of  the  Central  American  Republics  to- 
wards that  issue  is  as  vital  to  North  Americans  as  it  would  be  to 
the  citizens  of  the  various  republics  themselves.  The  want  of  an 
understanding  between  the  Chancellories  of  Central  America  and 
our  own  State  Department  on  this  question  might  lead  to.  the 
gravest  consequences.  Fortunately  there  appears  to  be  no  danger 
of  this  at  the  present  time  in  view  of  the  present  attitude  of  the 
governments  of  the  various  countries  toward  this  matter. 

The  great  necessity  for  immigration  into  the  Central  Ameri- 
can Republics  is  recognized  where  the  matter  has  been  seriously 
investigated.  It  is  desirable  for  a  variety  of  reasons,  but  particularly 
so  because  of  the  lack  of  inhabitants.  Save  in  one  republic,  that 
of  Salvador,  the  number  of  people  is  far  out  of  proportion  to  the 
extraordinary  area  of  these  countries.  Especially  so  is  this  true 
of  the  Republic  of  Honduras.  In  its  vast  territory  of  120,000 
kilometers  it  has  only  400,000  inhabitants,  although  capable  of 
supporting  several  millions.  Equally  true  is  this  of  Nicaragua 
which  has  but  500,000  within  its  confines,  covering  an  area  of  128,- 
000  kilometers.  The  population  of  Costa  Rica  is  but  400,000 — 
insignificant  in  comparison  with  its  territory  of  59,600  kilometers. 
The  Republic  of  Guatemala  is  the  only  exception  to  this  general 

(744) 


Imm'ujration — A  Central  American  Problem  167 

rule,  having  about  2,000,000  inhabitants  compared  to  its  territory 
of  150,000  kilometers. 

The  wonderful  natural  advantages  possessed  by  the  Central 
American  Republics  afford  extraordinary  possibilities.  Nature  is 
so  provident  that  but  slight  human  effort  is  required  to  make  her 
yield  many  fold.  With  the  single  exception  of  the  Republic  of 
Costa  Rica,  which  is  on  a  strong  financial  basis,  and  also  possibly 
Salvador,  the  economic  situation  in  the  other  republics  leaves  much 
to  be  desired.  For  this  condition  certain  foreigners  are  in  a  large 
measure  responsible,  notably  in  the  case  of  Honduras  which  is 
still  suffering  from  the  effects  of  financial  operations  that  were 
perpetrated  by  a  number  of  unscrupulous  English  financiers. 

In  discussing  the  general  character  of  the  immigration  desired, 
it  is  necessary  to  consider  the  kind  and  number  of  immigrants 
that  have  already  established  themselves  in  Central  America.  This 
is  rather  difficult,  owing  to  the  lack  of  a  recent  census.  The  fol- 
lowing statement,  based  on  official  reports  is  believed  to  be  approxi- 
mately correct : 

German.         French,         American.         English.         Spanish.         Italian. 

Guatemala      7,500  1,100  1,850  1,200  1,100  1,300 

Honduras       450  300  1,975  1,500  450  200 

Nicaragua       250  100  525  750  200  150 

Salvador     475  1,250  250  1,200  600  450 

Costa  Rica     525  300  1,140  350  500  200 

Analyzing  them  it  wall  be  noted  that  of  the  foreigners  resi- 
dent in  Central  America  certain  nationalities  predominate.  Thus  in 
Honduras  there  are  more  Americans  than  those  of  any  other  nation- 
ality. In  Guatemala  the  Germans  are  exceedingly  numerous,  while 
in  Salvador  the  French  predominate.  A  further  consideration  of 
these  figures  will  lead  to  an  inquiry  as  to  the  pursuits  or  means 
of  livelihood  of  these  immigrants.  The  following  is  an  outline  of 
the  industries  and  pursuits  in  which  the  various  nationalities  are 
engaged : 

Mining    English,  Americans 

Railways     English,  Americans 

Plantations    Germans,  Americans 

Banks  English  and  French 

Dry  Goods  and  Similar  Lines   French 

(745) 


i68  The  Ajiiials  of  the  American  Academy 

Hardware,  Agriculture   and  Machinery   Germans 

Groceries,    Liquors,    Hotels    Spanish 

Professions    Germans,   Americans,   French 

It  will  be  readily  understood  that  the  foreigners  resident  in 
Central  America  have  a  most  vital  effect  on  national  problems, 
particularly  on  that  of  finance.  It  must  be  apparent  that  the  intelli- 
gent co-operation  of  foreigners  in  the  solution  of  local  problems 
is  of  vital  importance. 

The  physical  condition  of  the  countries  must  be  considered  in 
discussing  immigration,  as  it  has  an  immediate  and  vital  bearing 
on  the  subject  in  hand.  In  reality  this  factoi  probably  exceeds  in 
importance  all  others,  although  the  kind  of  inhabitant  with  whom 
the  immigrant  will  have  to  associate,  the  commercial  opportunities 
and  means  of  livelihood  generally  are  likewise  very  serious  con- 
siderations. In  Central  America  is  found  practically  every  variety 
of  climate  from  the  hot  lowlands  on  the  coast  to  the  temperate  zone 
of  the  uplands  or  plateau  regions,  the  vegetation  of  which  never  fails 
to  delight  the  stranger.  It  is  quite  natural,  therefore,  that  the  for- 
eigners who  have  thus  far  established  themselves  in  Central  America 
have  sought  residence  in  the  uplands  which  are  not  only  more 
healthful  but  where  life  is  much  more  agreeable  than  in  the  hot 
coast  towns.  Rare,  indeed,  is  the  traveler  who  fails  to  praise  the 
climate  of  Guatemala  City,  Tegucigalpa,  Honduras  or  San  Jose, 
Costa  Rica.  Innumerable  other  towns  of  similar  type  are  found 
scattered  throughout  the  hills  and  mountains,  and  as  the  journey 
to  the  warmer  regions  is  such  a  short  one,  the  foreigner  finds  the 
highlands  the  most  logical  place  for  his  home. 

In  the  consideration  of  conditions  effecting  immigration  to 
Central  America  it  will  be  noted  that  these  dififer  materially  from 
those  of  other  countries,  particularly  the  United  States.  At  the 
ports  of  this  country  arrive  annually  more  than  a  million  people, 
the  great  majority  of  whom  are  illiterate  and  unskilled.  Even 
in  the  United  States  opinion  is  divided  as  to  our  ability  to  assimilate 
this  vast  influx  of  foreigners.  The  reason  for  its  mention  in  this 
connection  is  that  conditions  may  be  contrasted  with  those  pre- 
vailing in  Central  America. 

It  is  safe  to  say  that  an  immigration  of  a  similar  character 
to  that  now  coming  into  the  United  States  to  the  Central  American 

(746) 


Immigration — A  Central  American  Problem  169 

Republics  would  menace,  not  only  the  republics  themselves,  but 
serious  danger  would  in  turn  threaten  the  United  States,  paradoxi- 
cal as  this  may  seem.  Its  evil  effects  would  be  quickly  recognized 
in  its  effect  on  the  governments  themselves,  as  the  conditions  that 
prevail  in  Central  America  would  not  permit  of  such  assimilation. 
If  an  immigration  of  that  character  were  turned  in  the  direction 
of  Central  America  for  any  length  of  time,  there  would  be  serious 
danger  of  the  population  of  these  republics  being  outnumbered  and 
the  establishment  of  large  colonies  of  illiterate  people  would  be  a 
serious  menace  to  each  of  the  republics  as  well  as  to  all  America. 
The  problems  confronting  our  own  immigration  officers,  such  as  the 
exclusion  of  diseased,  infirm  and  pauper  immigrants,  would  become 
even  greater  ones  for  the  statesmen  of  Central  America. 

Happily  the  danger  from  this  source  is  comparatively  small. 
This  is  due  in  a  measure  to  the  fact  that  such  immigrants  would 
find  it  exceedingly  difficult  to  compete  with  the  native  peasant 
type  classes  who  up  to  the  present  time  have  represented  the  ele- 
ment which  has  performed  the  labor  of  the  country.  As  soon  as 
economic  conditions  in  Central  America  warrant  an  immigration 
of  the  character  which  has  had  such  a  marked  effect  on  the  repub- 
lics of  Argentine,  Brazil  and  Uruguay  in  South  America,  the  ques- 
tion will  be  a  far  simpler  one.  The  earnest  student  of  this  matter 
is  forced  to  the  conclusion  that  sooner  or  later  the  Central  Ameri- 
can governments  will  be  compelled  to  adopt  methods  similar 
to  those  now  in  vogue  in  South  American  countries  in  order  to 
insure  a  proper  development  of  their  own  countries.  In  the  solu- 
tion of  this  matter  lie  to  a  great  extent  the  possibilities  of  the 
future,  since  it  is  logical  that  the  economic  prosperity  of  the  coun- 
tries will  reflect  great  credit  upon  its  statesmen  and  the  incentive 
to  bring  this  condition  about  is  thus  greater. 

However,  it  must  not  be  overlooked  that  the  conditions  under 
which  the  peasant  or  native  classes  of  Central  America  live  are 
far  from  attractive  to  the  foreigner.  Their  ability  to  earn  a  reason- 
able wage  is  also  greatly  affected  by  the  distressing  economic 
situation,  since  wages  are  very  small  and  it  has  been  necessary  for 
the  native  to  sustain  himself  and  his  family  on  the  merest  pit- 
tance. Although  their  requirements  are  comparatively  limited,  due 
to  the  prodigality  of  nature,  education  and  better  environment  would 
exercise  a  very  material  effect  on  this  great  class  now  forming  such 

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I/O  The  Annals  of  the  American  Academy 

an  important  part  of  the  population  of  all  Central  American 
countries. 

The  development  of  immigration  is  to  be  greatly  desired,  since 
the  indirect  effect  which  that  influence  would  exert  cannot  be  over- 
estimated. Consequent  to  the  development  of  the  natural  resources 
l|  and   industries  of  the  countries   will   come   an   increasing   scarcity 

of  labor.  The  employment  of  coolie  labor  which  may  then  be  at- 
tempted, as  it  has  been  in  other  countries,  is  fraught  with  danger 
to  all  concerned  and  is  of  equal  concern  to  the  people  of  Central 
America  as  to  the  residents  of  the  United  States.  It  is  to  be  sup- 
posed, of  course,  that  any  contracts  with  the  oriental  employers 
of  labor,  will  be  drawn  in  such  terms  that  there  can  be  no  evasion 
of  the  conditions  stipulated  therein.  Unless  this  were  done  there 
might  result  the  establishment  of  oriental  colonies  in  America  with 
the  consequent  problems  which  would  unquestionably  arise  with 
reference  to  sanitation,  government,  etc.  It  is  not  unreasonable  to 
believe,  however,  that  the  difficulties  of  such  a  situation  will  be 
obviated  by  careful  administration  and  will  doubtless  be  altogether 
avoided. 

The  immigration  which  has  been  encouraged,  even  under 
present  conditions,  to  some  extent  has  been  that  of  a  certain  type  of 
workmen,  the  skilled  mechanic,  small  capitalist  or  individual  with 
large  means.  As  in  practically  all  Latin-American  Republics  the 
individual  without  means  of  support  during  the  first  six  months  or 
year's  residence  is  exposed  to  risk  of  non-employment,  hence  the 
immigrant  should  not  fail  to  provide  himself  with  sufficient  funds 
to  maintain  himself  during  that  period.  While  up  to  the  present 
time  the  individuals  who  have  established  themselves  in  Central 
America  have  been  largely  of  the  investing  classes,  they  were  in 
many  instances  upon  their  arrival  but  indifferently  provided  with 
means.  The  most  successful,  generally  speaking,  are  those  who 
have  been  sufficiently  well  provided  with  funds  with  which  to 
invest  in  mercantile,  agricultural  or  mining  ventures.  In  this  con- 
nection a  sketch  of  the  immigrant,  his  purposes,  etc.,  is  quite 
pertinent.  The  Spaniard,  of  which  nationality  many  have  estab- 
lished themselves  in  Central  America,  is  generally  quite  poor  upon 
arrival.  The  business  in  which  he  is  most  frequently  found  is 
that  of  breadstuffs.  By  dint  of  energy,  perseverance  and  economy 
he  frequently  rises  to  positions  of  importance  in  the  community. 

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Iiiiiiii^ratio)i — A  Central  .imcrican  Problem  171 

The  Italian  is  of  a  similar  type  and  he  too  is  an  important  factor 
in  the  branch  of  food  supplies,  restaurant  businesses  and  similar 
vocations.  The  Frenchman  usually  engai^es  in  the  dry  goods  line, 
and  of  this  class  there  are  many  examples  in  every  large  city  of 
Central  America,  The  German  may  be  said  to  dominate  the  hard- 
ware trade,  and  with  more  frequency  than  any  other  nationality 
engages  in  the  plantation  business.  The  development  of  the  mineral 
resources,  the  organization  of  banks  and  railroads  has  been  to  a 
considerable  extent  controlled  by  the  British.  The  Americans  have 
to  a  great  extent  been  interested  in  all  the  vocations  mentioned,  but 
especially  in  mines,  railroads  and  plantations,  while  the  obtaining 
of  concessions  for  the  taking  out  of  timber  and  valuable  dyestuffs 
generally  has  been  almost  exclusively  monopolized  by  them. 

The  truism  that  trade  follows  the  flag  is  another  vital  reason 
for  American  interest  in  the  immigration  to  Central  America.  The 
great  business  of  Germany  with  Guatemala,  the  commerce  of 
which  is  almost  exclusively  in  the  hands  of  Germans,  is  an  instance 
of  this  fact.  Reference  may  also  be  made  to  the  trade  which 
France  enjoys  with  the  Republic  of  Salvador,  the  merchants  of 
whose  capital,  San  Salvador,  are  largely  French.  Notwithstanding 
the  proximity  of  Central  America  to  the  southern  boundaries  of 
the  United  States,  it  behooves  the  merchants  of  this  country  to 
bestir  themselves  if  they  are  to  enjoy  a  proportionate  share  of  the 
business  of  Central  America ;  and  the  encouragement  of  American 
immigration  to  those  repul)lics  will  result  in  an  increased  demand 
for  the  products  of  the  home  country. 

Another  phase  of  the  problem  of  immigration  is  that  of  the 
social  side,  for  the  natural  characteristics  of  foreigners  frequently 
find  expression  in  their  relations  with  those  around  them.  The 
German  in  Central  America  as  in  other  lands  where  he  takes  up 
his  residence,  adapts  himself  perfectly  to  the  native  customs  and 
conditions  of  the  people.  He  is  invariably  a  strong  factor  in  the 
social  economy  of  his  adopted  home  and  the  ties  are  frequently 
strengthened  by  his  intermarriage  with  natives.  This  is  to  a  lesser 
extent  true  of  the  French,  while  the  Fnglish  and  Americans  are 
noted  for  maintaining  their  racial  and  national  unity. 

Reference  has  already  been  made  to  the  misunderstandings 
and  difficulties  wdiich  are  likely  to  arise  by  reason  of  the  failure 
of  Americans  to  recognize  the  nice   social   distinctions   so  clearly 

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172  The  Annals  of  the  American  Academy 

drawn  by  Latin-American  people.  The  foreign  resident,  no  matter 
of  what  nation,  by  a  thorough  understanding  of  the  people,  a  recog- 
nition of  their  customs,  and  an  acquaintance  with  the  language  of 
the  people,  will  accomplish  for  his  country  far  more  than  any 
expression  of  friendship  through  diplomacy  or  treaty.  This  phase 
of  the  subject  is  one  with  which  the  people  of  the  United  States  are 
particularly  concerned,  since  by  the  encouragement  of  citizens  of 
their  own  country  to  recognize  this  basic  principle  they  will  do  more 
to  allay  the  antipathy  on  the  part  of  Central  Americans  towards  the 
United  States  than  by  any  other  means  which  might  be  taken. 

This  article  is  by  no  means  an  attempt  to  offer  a  solution  for 
the  vexing  subject  of  immigration  into  Central  America.  It  is 
merely  an  efifort  to  point  out  certain  facts  which  are  of  the  greatest 
weight  in  dealing  with  the  topic.  The  problem  is  one  of  tremendous 
import.  Indeed,  too  much  importance  cannot  be  placed  upon  this 
question.  The  intelligent  consideration  by  xA.mericans  of  the  local 
issues  involved,  of  its  general  principles  and  of  its  relation  to  the 
United  States  will  do  much  tow^ards  contributing  to  a  better  under- 
standing between  the  people  of  Central  America  and  those  of  the 
United  States. 


(7.S0) 


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